[Federal Register: June 18, 2010 (Volume 75, Number 117)]
[Proposed Rules]
[Page 34805-34890]
From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr18jn10-28]
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Part II
Department of Education
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34 CFR Parts 600, 602, et al.
Program Integrity Issues; Proposed Rule
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DEPARTMENT OF EDUCATION
34 CFR Parts 600, 602, 603, 668, 682, 685, 686, 690, and 691
[Docket ID ED-2010-OPE-0004]
RIN 1840-AD02
Program Integrity Issues
AGENCY: Office of Postsecondary Education, Department of Education.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Secretary proposes to improve integrity in the programs
authorized under title IV of the Higher Education Act of 1965, as
amended (HEA) by amending the regulations for Institutional Eligibility
Under the HEA, the Secretary's Recognition of Accrediting Agencies, the
Secretary's Recognition Procedures for State Agencies, the Student
Assistance General Provisions, the Federal Family Education Loan (FFEL)
Program, the William D. Ford Federal Direct Loan Program, the Teacher
Education Assistance for College and Higher Education (TEACH) Grant
Program, the Federal Pell Grant Program, and the Academic
Competitiveness Grant (AGC) and National Science and Mathematics Access
to Retain Talent Grant (National Smart Grant) Programs.
DATES: We must receive your comments on or before August 2, 2010.
ADDRESSES: Submit your comments through the Federal eRulemaking Portal
or via postal mail, commercial delivery, or hand delivery. We will not
accept comments by fax or by e-mail. Please submit your comments only
one time, in order to ensure that we do not receive duplicate copies.
In addition, please include the Docket ID at the top of your comments.
Federal eRulemaking Portal. Go tohttp://
www.regulations.gov to submit your comments electronically. Information
on using Regulations.gov, including instructions for accessing agency
documents, submitting comments, and viewing the docket, is available on
the site under ``How To Use This Site.''
Postal Mail, Commercial Delivery, or Hand Delivery. If you
mail or deliver your comments about these proposed regulations, address
them to Jessica Finkel, U.S. Department of Education, 1990 K Street,
NW., room 8031, Washington, DC 20006-8502.
Privacy Note: The Department's policy for comments received from
members of the public (including those comments submitted by mail,
commercial delivery, or hand delivery) is to make these submissions
available for public viewing in their entirety on the Federal
eRulemaking Portal athttp://www.regulations.gov. Therefore,
commenters should be careful to include in their comments only
information that they wish to make publicly available on the
Internet.
FOR FURTHER INFORMATION CONTACT: For information related to gainful
employment in a recognized occupation, John Kolotos. Telephone: (202)
502-7762 or via the Internet at:John.Kolotos@ed.gov.
For information related to the provisions related to the definition
of credit hour, Marianna Deeken or Fred Sellers. Telephone: (206) 615-
2583 or via the Internet atMarianna.Deeken@ed.gov. Telephone: (202)
502-7502 or via the Internet at:Fred.Sellers@ed.gov.
For information related to provisions on State authorization, Fred
Sellers. Telephone: (202) 502-7502 or via the Internet at:
Fred.Sellers@ed.gov.
For information related to the provisions on retaking coursework,
Vanessa Freeman. Telephone: (202) 502-7523 or via the Internet at:
Vanessa.Freeman@ed.gov.
For information related to the provisions for written agreements
between institutions, Carney McCullough. Telephone: (202) 502-7639 or
via the Internet at:Carney.McCullough@ed.gov.
For information on the provisions related to incentive
compensation, Marty Guthrie. Telephone: (202) 219-7031 or via the
Internet at:Marty.Guthrie@ed.gov.
For information related to the provisions on ability to benefit,
Dan Klock. Telephone: (202) 377-4026 or via the Internet at
Dan.Klock@ed.gov.
For information related to the provisions on misrepresentation,
Vanessa Freeman. Telephone: (202) 502-7523 or via the Internet at:
Vanessa.Freeman@ed.gov.
For information related to the provisions on satisfactory academic
progress, Marianna Deeken. Telephone: (206) 615-2583 or via the
Internet at:Marianna.Deeken@ed.gov.
For information related to the provisions on high school diplomas
and verification of information on the Free Application for Federal
Student Aid (FAFSA), Jacquelyn Butler. Telephone: (202) 502-7890, or
via the Internet at:Jacquelyn.Butler@ed.gov.
For information related to the return of title IV, HEA funds
calculation provisions for term-based modules or taking attendance,
Jessica Finkel. Telephone: (202) 502-7647, or via the Internet at:
Jessica.Finkel@ed.gov.
For information related to the provisions on timeliness and method
of disbursement, John Kolotos. Telephone: (202) 502-7762, or via the
Internet at:John.Kolotos@ed.gov.
If you use a telecommunications device for the deaf (TDD), call the
Federal Relay Service (FRS), toll free, at 1-800-877-8339.
Individuals with disabilities can obtain this document in an
accessible format (e.g., braille, large print, audiotape, or computer
diskette) on request to one of the contact persons listed under FOR
FURTHER INFORMATION CONTACT.
SUPPLEMENTARY INFORMATION:
Invitation To Comment
As outlined in the section of this notice entitled Negotiated
Rulemaking, significant public participation, through a series of three
regional hearings and three negotiated rulemaking sessions, has
occurred in developing this notice of proposed rulemaking (NPRM). In
accordance with the requirements of the Administrative Procedure Act,
the Department invites you to submit comments regarding these proposed
regulations on or before August 2, 2010. To ensure that your comments
have maximum effect in developing the final regulations, we urge you to
identify clearly the specific section or sections of the proposed
regulations that each of your comments addresses and to arrange your
comments in the same order as the proposed regulations.
We invite you to assist us in complying with the specific
requirements of Executive Order 12866 and its overall requirement of
reducing regulatory burden that might result from these proposed
regulations. Please let us know of any further opportunities we should
take to reduce potential costs or increase potential benefits while
preserving the effective and efficient administration of the programs.
During and after the comment period, you may inspect all public
comments about these proposed regulations by accessing Regulations.gov.
You may also inspect the comments, in person, in room 8031, 1990 K
Street, NW., Washington, DC, between the hours of 8:30 a.m. and 4:00
p.m., Eastern time, Monday through Friday of each week except Federal
holidays.
Assistance to Individuals With Disabilities in Reviewing the Rulemaking
Record
On request, we will supply an appropriate aid, such as a reader or
print magnifier, to an individual with a disability who needs
assistance to review the comments or other documents in the public
rulemaking record for these proposed regulations. If
[[Page 34807]]
you want to schedule an appointment for this type of aid, please
contact one of the persons listed under FOR FURTHER INFORMATION
CONTACT.
Negotiated Rulemaking
Section 492 of the HEA requires the Secretary, before publishing
any proposed regulations for programs authorized by title IV of the
HEA, to obtain public involvement in the development of the proposed
regulations. After obtaining advice and recommendations from the
public, including individuals and representatives of groups involved in
the Federal student financial assistance programs, the Secretary must
subject the proposed regulations to a negotiated rulemaking process.
All proposed regulations that the Department publishes on which the
negotiators reached consensus must conform to final agreements
resulting from that process unless the Secretary reopens the process or
provides a written explanation to the participants stating why the
Secretary has decided to depart from the agreements. Further
information on the negotiated rulemaking process can be found at:
http://www.ed.gov/policy/highered/leg/hea08/index.html.
On September 9, 2009, the Department published a notice in the
Federal Register (74 FR 46399) announcing our intent to establish two
negotiated rulemaking committees to prepare proposed regulations. One
committee would develop proposed regulations governing foreign schools,
including the implementation of the changes made to the HEA by the
Higher Education Opportunity Act of 2008 (HEOA), Public Law 110-315,
that affect foreign schools. The proposed regulations governing foreign
schools will be published in the Federal Register at a future date. A
second committee would develop proposed regulations to improve
integrity in the title IV, HEA programs. The notice requested
nominations of individuals for membership on the committees who could
represent the interests of key stakeholder constituencies on each
committee.
Team I--Program Integrity Issues (Team I) met to develop proposed
regulations during the months of November 2009 through January 2010.
The Department developed a list of proposed regulatory provisions,
including provisions based on advice and recommendations submitted by
individuals and organizations as testimony to the Department in a
series of three public hearings held on:
June 15, 2009 at Community College of Denver in Denver,
CO.
June 18, 2009 at University of Arkansas in Little Rock,
AR.
June 22, 2009 at Community College of Philadelphia in
Philadelphia, PA.
In addition, the Department accepted written comments on possible
regulatory provisions submitted directly to the Department by
interested parties and organizations. A summary of all comments
received orally and in writing is posted as background material in the
docket for this NPRM. Transcripts of the regional meetings can be
accessed athttp://www2.ed.gov/policy/highered/reg/hearulemaking/2009/
negreg-summerfall.html#ph.
Staff within the Department also identified issues for discussion
and negotiation.
At its first meeting, Team I reached agreement on its protocols.
These protocols provided that for each community identified as having
interests that were significantly affected by the subject matter of the
negotiations, the non-Federal negotiators would represent the
organizations listed after their names in the protocols in the
negotiated rulemaking process.
Team I included the following members:
Rich Williams, U.S. PIRG, and Angela Peoples (alternate), United
States Student Association, representing students.
Margaret Reiter, attorney, and Deanne Loonin (alternate), National
Consumer Law Center, representing consumer advocacy organizations.
Richard Heath, Anne Arundel Community College, and Joan Zanders
(alternate), Northern Virginia Community College, representing two-year
public institutions.
Phil Asbury, University of North Carolina, Chapel Hill, and Joe
Pettibon (alternate), Texas A&M University, representing four-year
public institutions.
Todd Jones, Association of Independent Colleges and Universities of
Ohio, and Maureen Budetti (alternate), National Association of
Independent Colleges and Universities, representing private, non-profit
institutions.
Elaine Neely, Kaplan Higher Education Corp., and David Rhodes,
(alternate), School of Visual Arts, representing private, for-profit
institutions.
Terry Hartle, American Council on Education, and Bob Moran
(alternate), American Association of State Colleges and Universities,
representing college presidents.
David Hawkins, National Association for College Admission
Counseling, and Amanda Modar (alternate), National Association for
College Admission Counseling, representing admissions officers.
Susan Williams, Bridgeport University, and Anne Gross (alternate),
National Association of College and University Business Officers,
representing business officers.
Val Meyers, Michigan State University, and Joan Berkes (alternate),
National Association of Student Financial Aid Administrators,
representing financial aid administrators.
Barbara Brittingham, Commission on Institutions of Higher Education
of the New England Association of Schools and Colleges, Sharon Tanner
(1st alternate), National League for Nursing Accreditation Commission,
and Ralph Wolf (2nd alternate), Western Association of Schools and
Colleges, representing regional/programmatic accreditors.
Anthony Mirando, Nation Accrediting Commission of Cosmetology Arts
and Sciences, and Michale McComis (alternate), Accrediting Commission
of Career Schools and Colleges, representing national accreditors.
Jim Simpson, Florida State University, and Susan Lehr (alternate),
Florida State University, representing work force development.
Carol Lindsey, Texas Guaranteed Student Loan Corp, and Janet Dodson
(alternate), National Student Loan Program, representing the lending
community.
Chris Young, Wonderlic, Inc., and Dr. David Waldschmidt
(alternate), Wonderlic, Inc., representing test publishers.
Dr. Marshall Hill, Nebraska Coordinating Commission for
Postsecondary Education, and Dr. Kathryn Dodge (alternate), New
Hampshire Postsecondary Education Commission, representing State higher
education officials.
Carney McCullough and Fred Sellers, U.S. Department of Education,
representing the Federal Government.
These protocols also provided that, unless agreed to otherwise,
consensus on all of the amendments in the proposed regulations had to
be achieved for consensus to be reached on the entire NPRM. Consensus
means that there must be no dissent by any member.
During the meetings, Team I reviewed and discussed drafts of
proposed regulations. At the final meeting in January 2010, Team I did
not reach consensus on the proposed regulations
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in this document. With regard to gainful employment in a recognized
occupation, this document addresses technical, reporting, and
disclosure issues. The remaining issues under consideration that
address the extent to which certain educational programs lead to
gainful employment and the conditions under which those programs remain
eligible for title IV, HEA program funds are not included in this NPRM.
Summary of Proposed Changes
These proposed regulations would address program integrity issues
by:
Requiring institutions to develop and follow procedures to
evaluate the validity of a student's high school diploma if the
institution or the Secretary has reason to believe that the diploma is
not valid or was not obtained from an entity that provides secondary
school education;
Expanding eligibility for title IV, HEA program assistance
to students who demonstrate they have the ability to benefit by
satisfactorily completing six credits of college work, or the
equivalent amounts of coursework, that are applicable toward a degree
or certificate offered by an institution;
Amending and adding definitions of terms related to
ability to benefit testing, including ``assessment center,''
``independent test administrator,'' ``individual with a disability,''
``test,'' ``test administrator,'' and ``test publisher'';
Consolidating into a single regulatory provision the
approval processes for ability to benefit tests developed by test
publishers and States;
Establishing requirements under which test publishers and
States must provide descriptions of processes for identifying and
handling test score abnormalities, ensuring the integrity of the
testing environment, and certifying and decertifying test
administrators;
Requiring test publishers and States to describe any
accommodations available for individuals with disabilities, as well as
the process a test administrator would use to identify and report to
the test publisher instances in which these accommodations were used;
Revising the test approval procedures and criteria for
ability to benefit tests, including procedures related to the approval
of tests for speakers of foreign languages and individuals with
disabilities;
Revising the definitions and provisions that describe the
activities that constitute substantial misrepresentation by an
institution of the nature of its educational program, its financial
charges, or the employability of its graduates;
Removing the ``safe harbor'' provisions related to
incentive compensation for any person or entity engaged in any student
recruitment or admission activity, including making decisions regarding
the award of title IV, HEA program assistance;
Clarifying what is required for an institution of higher
education, a proprietary institution of higher education, and a
postsecondary vocational institution to be considered legally
authorized by the State;
Defining a credit hour and establishing procedures that
certain institutional accrediting agencies must have in place to
determine whether an institution's assignment of a credit hour is
acceptable;
Modifying provisions to clarify whether and when an
institution must award student financial assistance based on clock or
credit hours and the standards for credit-to-clock-hour conversions;
Modifying the provisions related to written arrangements
between two or more eligible institutions that are owned or controlled
by the same person or entity so that the percentage of the educational
program that may be provided by the institution that does not grant the
degree or certificate under the arrangement may not exceed 50 percent;
Prohibiting written arrangements between an eligible
institution and an ineligible institution that has had its
certification to participate in title IV, HEA programs revoked or its
application for recertification denied;
Expanding provisions related to the information that an
institution with a written arrangement must disclose to a student
enrolled in a program affected by the arrangement, including, for
example, the portion of the educational program that the institution
that grants the degree or certificate is not providing;
Revising the definition of unsubsidized student financial
aid programs to include TEACH Grants, Federal PLUS Loans, and Direct
PLUS Loans;
Codifying current policy that an institution must complete
verification before the institution may exercise its professional
judgment authority;
Eliminating the 30 percent verification cap;
Retaining the ability of institutions to select additional
applicants for verification;
Replacing the five verification items for all selected
applicants with a targeted selection from items included in an annual
Federal Register notice published by the Secretary;
Allowing interim disbursements when changes to an
applicant's FAFSA information would not change the amount that the
student would receive under a title IV, HEA program;
Codifying the Department's IRS Data Retrieval System
Process, which allows an applicant to import income and other data from
the IRS into an online FAFSA;
Requiring the processing of all changes and corrections to
an applicant's FAFSA information;
Modifying the provisions related to institutional
satisfactory academic progress policies and the impact these policies
have on a student's eligibility for title IV, HEA program assistance;
Expanding the definition of full-time student to allow,
for a term-based program, repeated coursework taken in the program to
count towards a full-time workload;
Clarifying when a student is considered to have withdrawn
from a payment period of enrollment for the purpose of calculating a
return of title IV, HEA program funds;
Clarifying the circumstances under which an institution is
required to take attendance for the purpose of calculating a return of
title IV, HEA program funds;
Modifying the provisions for disbursing title IV, HEA
program funds to ensure that certain students can obtain or purchase
books and supplies by the seventh day of a payment period;
Updating the definition of the term recognized occupation
to reflect current usage; and
Establishing requirements for institutions to submit
information on program completers for programs that prepare students
for gainful employment in recognized occupations.
Significant Proposed Regulations
We group major issues according to subject, with appropriate
sections of the proposed regulations referenced in parentheses. We
discuss other substantive issues under the sections of the proposed
regulations to which they pertain. Generally, we do not address
proposed regulatory provisions that are technical or otherwise minor in
effect.
Part 600 Institutional Eligibility Under the Higher Education Act of
1965, as Amended
Gainful Employment in a Recognized Occupation (Sec. Sec. 600.2, 600.4,
600.5, 600.6, 668.6, and 668.8)
Statute: Sections 102(b) and (c) of the HEA define, in part, a
proprietary institution and a postsecondary vocational institution,
respectively, as
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an institution that provides an eligible program of training that
prepares students for gainful employment in a recognized occupation.
Section 101(b)(1) of the HEA defines an institution of higher
education, in part, as any institution that provides not less than a
one-year program of training that prepares students for gainful
employment in a recognized occupation.
One-Year Programs at Institutions of Higher Education
Current Regulations: Sec. 600.4(a)(4)(iii) provides that a public
or nonprofit institution may provide a training program of at least one
academic year that leads to a certificate, degree, or other recognized
educational credential and prepares students for gainful employment in
a recognized occupation. In addition, Sec. 668.8(c)(3) provides that
an eligible program at an institution of higher education may be at
least a one-academic-year training program that leads to a certificate,
degree, or other recognized credential and prepares students for
gainful employment in a recognized occupation.
Proposed Regulations: The proposed regulations would amend
Sec. Sec. 600.4(a)(4)(iii) and 668.8(c)(3) by removing the reference
to degree programs.
Reasons: In keeping with the statute, we would clarify in proposed
Sec. Sec. 600.4(a)(4)(iii) and 668.8(c)(3) that only certificate or
credentialed nondegree programs of at least one academic year, that are
offered by a public or nonprofit institution of higher education, are
programs that must prepare students for gainful employment in a
recognized occupation.
Recognized Occupation
Current Regulations: Section 600.2 defines a recognized occupation
as an occupation that is listed in an ``occupational division'' of the
latest edition of the Dictionary of Occupational Titles, published by
the U.S. Department of Labor, or an occupation determined to be a
recognized occupation by the Secretary in consultation with the
Secretary of Labor.
Proposed Regulations: Proposed Sec. 600.2 would define recognized
occupation as an occupation identified by a Standard Occupational
Classification (SOC) code established by the Office of Management and
Budget or an Occupational Information Network O* NET-SOC code
established by the Department of Labor and available athttp://
online.onetcenter.org or its successor site.
Reasons: The definition of recognized occupation in proposed Sec.
600.2 would simply replace an outdated reference to the Dictionary of
Occupational Titles with current references to SOC codes established by
the Office of Management and Budget or the Department of Labor.
Gainful Employment
Current Regulations: Sections 600.4(a)(4)(iii), 600.5(a)(5), and
600.6(a)(4) mirror the statutory provisions, and like the statute, do
not define or further describe the meaning of the phrase ``gainful
employment.''
Proposed Regulations: Under proposed Sec. 668.6(a), an institution
would annually submit information about students who complete a program
that leads to gainful employment in a recognized occupation. That
information would include, at a minimum, identifying information about
each student who completed a program, the Classification of
Instructional Program (CIP) code for that program, the date the student
completed the program, and the amounts the student received from
private educational loans and institutional financing plans.
In addition, under proposed Sec. 668.6(b), an institution would be
required to disclose on its Web site information about (1) the
occupations that its programs prepare students to enter, along with
links to occupational profiles on O*NET, (2) the on-time graduation
rate of students entering a program, (3) the cost of each program,
including costs for tuition and fees, room and board, and other
institutional costs typically incurred by students enrolling in the
program, (4) beginning no later than June 30, 2013, the placement rate
for students completing each of those programs, as determined under
Sec. 668.8(g) or a State-sponsored workforce data system, and (5) the
median loan debt incurred by students who completed each program in the
preceding three years, identified separately as title IV, HEA loan debt
and debt from private educational loans and institutional financing
plans.
Reasons: The Department plans to use this information to continue
to assess the outcomes of programs that lead to gainful employment in a
recognized occupation. The proposed new requirement would enable the
Department to further evaluate and monitor the outcomes of these
programs. In addition, to better inform prospective students, proposed
Sec. 668.6(b) would require an institution to disclose on its Web site
the cost, graduation and placement rates, job-related information for
each of its programs, and debt levels of students who completed the
program during the past three years. We seek comment on whether the
proposed Web-based approach is the most appropriate way to ensure that
prospective students obtain this information or whether we should
consider other approaches. With regard to disclosing Federal and non-
Federal loan debt, based on the information an institution would submit
under proposed Sec. 668.6(a), the Department would be able to provide
the institution with the median title IV, HEA loan debt, by program,
and the median debt from private loans and institutional financing
plans by program. The institution would then disclose these amounts.
While we believe that Sec. 668.43 already requires an institution to
disclose program cost information, we wish to make it an explicit
requirement in this part of the regulations because our research showed
that program cost information was not disclosed on the Web sites of
many institutions.
Definition of a Credit Hour (Sec. Sec. 600.2, 602.24, 603.24, and
668.8)
Statute: Section 481(a)(2) of the HEA defines an academic year for
an undergraduate program, in part, as requiring a minimum of 24
semester or trimester credit hours or 36 quarter credit hours in a
course of study that measures academic progress in credit hours or 900
clock hours in a course of study that measures academic progress in
clock hours. Section 481(b) of the HEA defines an eligible program, in
part, as a program of at least 600 clock hours, 16 semester hours, or
24 quarter hours or, in certain instances, a program of at least 300
clock hours, 8 semester hours, or 12 quarter hours. Sections 428(b)(1),
428B(a)(2), 428H(d)(1), 455(a)(1), and 484(b)(3) and (4) of the HEA
specify that a student must be carrying at least one-half of the normal
full-time work load for the student's course of study in order to
qualify for any loan under parts B and D of title IV of the HEA.
Section 401 of the HEA provides that a student's Federal Pell Grant
must be adjusted based on the student's enrollment status and that a
student must be enrolled at least half-time to be eligible for a second
consecutive Federal Pell Grant in an award year. Section 496(a)(5)(H)
of the HEA requires that an accrediting agency assess an institution's
measure of program length. Section 487(c)(4) of the HEA requires that
the Secretary publish a list of State agencies which the Secretary
determines to be reliable authorities as to the quality of public
[[Page 34810]]
postsecondary vocational education in their respective States for the
purpose of determining institutional eligibility for Federal student
assistance programs.
Current Regulations: There is no definition of a credit hour in any
current regulations for programs funded under the HEA; and the term is
not defined in the regulations that set out the requirements for the
Secretary's recognition of accrediting agencies or State agencies for
the approval of public postsecondary vocational education. The
regulations that address an institutional accrediting agency's, or
State approval agency's, reviews and evaluations of an institution's
assignment of credit hours are set out in 34 CFR part 602 for an
accrediting agency and 34 CFR part 603 for a State approval agency.
In current Sec. 668.8(k) and (l), the regulations provide the
formula that certain undergraduate programs must use to convert the
number of clock hours offered to the appropriate number of credit hours
used for title IV, HEA aid calculations and the requirements for
identifying the undergraduate programs subject to using the formula.
For these programs, each semester or trimester hour must include at
least 30 clock hours of instruction, and each quarter hour must include
at least 20 hours of instruction. An institution must use the formula
to determine if a program is eligible for title IV, HEA purposes unless
(1) the institution offers an undergraduate program in credit hours
that is at least two academic years in length and leads to an associate
degree, a bachelor's degree, or a professional degree or (2) each
course within the program is acceptable for full credit toward an
associate degree, bachelor's degree, or professional degree offered by
the institution, and the degree offered by the institution requires at
least two academic years of study.
Proposed Regulations: Definition of a Credit Hour
The Department proposes to add to Sec. 600.2 a definition of a
credit hour that would measure credit hours in terms of the amount of
time and work during which a student is engaged in academic activity
using commonly accepted academic practice in higher education, and
further would provide for institutionally established equivalencies as
represented by learning outcomes and verified achievement.
Accrediting Agency Procedures
The Department proposes to amend current Sec. 602.24 by adding a
new paragraph (f). Proposed Sec. 602.24(f) would describe the
responsibilities of an accrediting agency to review and evaluate an
institution's policies and procedures for the assignment of credit
hours and the institution's application of its policies and procedures
in assigning credit hours to its programs and courses. An accrediting
agency would be required to make a reasonable determination of whether
the institution's assignment of credit hours conforms to commonly
accepted practice in higher education. The proposed regulations in
Sec. 602.24(f) also would provide that an accrediting agency may use
sampling or other methods in its reviews of programs at institutions,
must take such actions that it deems appropriate to address any
deficiencies that it identifies, and must notify the Secretary promptly
of any systemic noncompliance with the agency's policies or significant
noncompliance regarding one or more programs at the institution.
State Approval Agency Procedures
The Department proposes to amend current Sec. 603.24 by
redesignating paragraph (c) as paragraph (d) and adding a new paragraph
(c). For State agencies for the approval of public postsecondary
education, proposed Sec. 603.24(c) would provide for the same
responsibilities as described for accrediting agencies regarding the
review and evaluation of an institution's policies and procedures for
the assignment of credit hours and the institution's application of its
policies and procedures in assigning credit hours to its programs and
courses.
Clock-to-Credit-Hour Conversion
Proposed Sec. 668.8(l)(1) would revise the method of converting
clock hours to credit hours to use a ratio of the minimum clock hours
in an academic year to the minimum credit hours in an academic year,
i.e., 900 clock hours to 24 semester or trimester hours or 36 quarter
hours. Thus, a semester or trimester hour would be based on at least
37.5 clock hours, and a quarter hour would be based on at least 25
clock hours. Proposed Sec. 668.8(l)(2) creates an exception to the
conversion ratio in proposed Sec. 668.8(l)(1) if neither an
institution's designated accrediting agency nor the relevant State
licensing authority for participation in the title IV, HEA programs
determines there are any deficiencies in the institution's policies,
procedures, and practices for establishing the credit hours that the
institution awards for programs and courses, as defined in proposed
Sec. 600.2. Under the exception provided by proposed Sec.
668.8(l)(2), an institution may combine students' work outside of class
with the clock-hours of instruction in order to meet or exceed the
numeric requirements established in proposed Sec. 668.8(l)(1).
However, under proposed Sec. 668.8(l)(2), the institution must use at
least 30 clock hours for a semester or trimester hour or 20 clock hours
for a quarter hour.
In determining whether there is outside work that a student must
perform, the analysis must take into account differences in coursework
and educational activities within the program. Some portions of a
program may require student work outside of class that justifies the
application of proposed Sec. 668.8(l)(2). In addition, the application
of proposed Sec. 668.8(l)(2) may vary within a program depending on
variances in required student work outside of class for different
portions of the program. Other portions of the program may not have
outside work, and proposed Sec. 668.8(l)(1) must be applied. Of
course, an institution applying only proposed Sec. 668.8(l)(1) to a
program eligible for conversion from clock hours to credit hours,
without an analysis of the program's coursework, would be considered
compliant with the requirements of proposed Sec. 668.8(l).
Proposed Sec. 668.8(k)(1)(ii) modifies a provision in current
regulations to provide that a program is not subject to the conversion
formula in Sec. 668.8(l) where each course within the program is
acceptable for full credit toward a degree that is offered by the
institution and that this degree requires at least two academic years
of study. Additionally, under proposed Sec. 668.8(k)(1)(ii), the
institution would be required to demonstrate that students enroll in,
and graduate from, the degree program.
Proposed Sec. 668.8(k)(2)(i) would provide that a program is
considered to be a clock-hour program if the program must be measured
in clock hours to receive Federal or State approval or licensure, or if
completing clock hours is a requirement for graduates to apply for
licensure or the authorization to practice the occupation that the
student is intending to pursue. Under proposed Sec. 668.8(k)(2)(ii)
and (iii), the program is also considered to be offered in clock hours
if the credit hours awarded for the program are not in compliance with
the definition of a credit hour in proposed Sec. 600.2, or if the
institution does not provide the clock hours that are the basis for the
credit hours awarded for the program or each course in the program and,
except as provided in current Sec. 668.4(e), require attendance in the
clock hours that are the basis for the credit hours awarded. The
proposed regulations on which tentative agreement was reached did not
include
[[Page 34811]]
the provision in proposed Sec. 668.8(k)(2)(iii) that, except as
provided in current Sec. 668.4(e), an institution must require
attendance in the clock hours that are the basis for the credit hours
awarded. However, during the negotiations we had previously proposed to
include such a provision.
Proposed Sec. 668.8(k)(3) would provide that proposed Sec.
668.8(k)(2)(i) would not apply if a limited portion of the program
includes a practicum, internship, or clinical experience component that
must include a minimum number of clock hours due to a State or Federal
approval or licensure requirement.
Reasons: Definition of a Credit Hour
A credit hour is a unit of measure that gives value to the level of
instruction, academic rigor, and time requirements for a course taken
at an educational institution. At its most basic, a credit hour is a
proxy measure of a quantity of student learning. The credit hour was
developed as part of a process to establish a standard measure of
faculty workloads, costs of instruction, and rates of educational
efficiencies as well as a measure of student work for transfer
students. While the credit hour was developed to provide some uniform
measure, it may not consistently relate to comparable measures of time
or workload within institutions or between different types of
institutions. Most postsecondary institutions do not have specific
policies or criteria to assign credit hours to coursework in a uniform
manner.
In keeping with the original purpose of providing a consistent
measure of at least a minimum quantity of a student's academic
engagement, the proposed definition of a credit hour will establish a
basis for measuring eligibility for Federal funding. This standard
measure will provide increased assurance that a credit hour has the
necessary educational content to support the amounts of Federal funds
that are awarded to participants in Federal funding programs and that
students at different institutions are treated equitably in the
awarding of those funds.
We recognize, however, that other measures of educational content
are being developed by institutions and do not intend to limit the
methods by which an institution may measure a student's work in his or
her educational activities. We, therefore, are including in paragraph
(3) of the proposed definition of a credit hour a provision that an
institution may provide institutional equivalencies for the amount of
work specified in paragraph (1) of the proposed definition as
represented in intended learning outcomes and verified by evidence of
their achievement. Further, the institution's equivalencies must be in
accordance with any process or conditions required by an institution's
designated accrediting agency for title IV, HEA program participation,
because these agencies are well positioned to provide oversight in this
area.
During the negotiated rulemaking sessions, a few of the non-Federal
negotiators were opposed to any proposal to define a credit hour
because they believed that a definition would impinge upon an
institution's ability to create innovative courses and teaching
methods. They also argued that the proposed definition was too
restrictive and inhibited the academic freedom of schools. Other non-
Federal negotiators agreed that a definition was necessary and did not
believe the Department's proposed definition would adversely impact
institutions. These other non-Federal negotiators agreed with our
position that the proposed definition of a credit hour would provide
sufficient flexibilities for institutions and supported keeping it in
the proposed regulations.
One significant change is proposed in the regulations to address a
concern raised during the negotiated rulemaking sessions regarding a
definition of a credit hour. The change is to recognize in paragraph
(3) of the proposed definition that an institution would be able to
establish reasonable equivalent measures of a credit hour. As is also
the case with paragraphs (1) and (2) of the proposed definition, the
measures must be reasonable and in accordance with the requirements of
the institution's designated accrediting agency, or State agency for
the approval of public postsecondary vocational education, for title
IV, HEA program participation as well as for participation in other HEA
programs. This change further ensures that the definition will allow
institutions to adopt alternative measures of student work.
The proposed definition of a credit hour does not change our policy
that we provide funding based only on credit hours that are the direct
result of postsecondary student work. Thus, we do not currently, nor do
we propose to, provide funding for credits awarded based on Advanced
Placement (AP) or International Baccalaureate (IB) programs, tests or
testing out, life experience, or similar competency measures.
No agreement was reached to amend Sec. 600.2 to include a
definition of a credit hour due to the belief of some non-Federal
negotiators that a definition would limit an institution's ability to
use alternative measures of student work.
Accrediting Agency Procedures
Section 496(a)(5) of the HEA requires that, to be recognized by the
Secretary, an accrediting agency must have standards to evaluate an
institution's or program's ``measures of program length and the
objectives of the degrees or credentials offered.'' Thus, accrediting
agencies are required to make a judgment about program length and the
amount of credit an institution or program grants for course work.
Accrediting agency standards related to program length differ
significantly in their specificity and these standards generally do not
define what a credit hour is. This lack of specificity in standards
covering student achievement and program length has inherent
limitations and may result in inconsistent treatment of Federal funds.
We believe that the lack of more direct accrediting agency
oversight in the assignment of credits to coursework may result in some
institutions not being able to demonstrate that there is sufficient
course content to substantiate the credit hours for certain programs.
Such abuse may be more likely due to the expanded availability to a
student of two Federal Pell Grants in an award year. We believe that
the potential for such abuse and the inconsistent treatment of Federal
funds would be significantly alleviated by establishing the proposed
definition of credit hour in Sec. 600.2 and providing in proposed
Sec. 602.24(f) that accrediting agencies must review (1) an
institution's policies and procedures for the assignment of credit
hours in accordance with the proposed definition in Sec. 600.2 and (2)
the institution's application of its policies and procedures in
assigning credit hours to its programs and courses.
The negotiators reached tentative agreement on adding proposed
Sec. 602.24(f).
State Agency Procedures for the Approval of Public Vocational Education
The regulations concerning the recognition of State agencies for
the approval of public vocational education were not discussed during
the negotiations. We believe that Sec. 603.24 should be amended to
make changes comparable to the proposed regulations for the recognition
of accrediting agencies. We believe these proposed changes are needed
for the same reasons as we are proposing to amend part 602. The changes
are also necessary for purposes of determining equivalencies
[[Page 34812]]
to a credit hour under paragraph (3) of the proposed definition of a
credit hour in Sec. 600.2 as well as for Sec. 668.8(l) regarding
credit-to-clock-hour conversions.
Credit-to-Clock-Hour Conversion
Section 668.8(k) and (l) of the current regulations that provide
conditions and formulas for the conversion of clock hours to credit
hours for undergraduate programs were adopted prior to the statutory
change in the definition of an academic year for clock-hour programs.
Under section 481(b) of the HEA, an academic year for a program must
now provide for a minimum of 26 weeks of instructional time in a clock-
hour program as opposed to the 30 weeks of instructional time required
for credit-hour programs. However, undergraduate programs continue to
include 900 clock hours, 24 semester or trimester hours, or 36 quarter
credits. We are proposing to update the formula to reflect the
statute's treatment of 900 clock hours over 26 weeks of instructional
time as reflecting no outside student work and the 900 clock hours
being directly proportional to 24 semester hours or 36 quarter credits.
As a result, proposed Sec. 668.8(l)(1) would revise the minimum
general standard for converting clock hours to credit hours to reflect
the ratio of the minimum clock hours in an academic year to the minimum
credit hours in an academic year. As some non-Federal negotiators
noted, portions of some clock-hour programs require student work
outside of class. Proposed Sec. 668.8(l)(2) would, therefore, provide
an exception to the standard in proposed Sec. 668.8(l)(1) for
coursework in a program that qualifies for a lesser rate of conversion
based on additional student work outside of class. For coursework that
includes student work outside of class in a qualifying program, an
institution would take into account the amount of outside coursework to
determine the appropriate number of clock hours to convert to a credit
hour, but may not use less than the current requirements of 30 clock
hours for a semester or trimester hour or 20 clock hours for a quarter
hour.
We believe that changes are needed to the conditions in current
Sec. 668.8(k)(1) for determining that a program is not subject to the
conversion formula in Sec. 668.8(l). We have identified potential
abuses with the provision that an institution's program is not subject
to the conversion formula in Sec. 668.8(l) if each course within the
program is acceptable for full credit toward a degree that is offered
by the institution and requires at least two academic years of study.
Some institutions appear to have established degree programs in which
few if any students enroll or graduate but which are the basis for
claiming that all courses of another nondegree program are acceptable
for full credit in the degree program. To address this abuse, proposed
Sec. 668.8(k)(1)(ii) would require the institution to demonstrate that
students enroll in, and graduate from, the degree program. Proposed
Sec. 668.8(k)(2)(i) would provide that a program must be considered a
clock-hour program if the program must be measured in clock hours to
receive Federal or State approval or licensure or completing clock
hours is a requirement for graduates to apply for licensure or the
authorization to practice the occupation that the student is intending
to pursue. We believe such requirements show that the program is still
fundamentally a clock-hour program and should not be treated as a
credit-hour program for purposes of title IV, HEA program assistance.
We also believe it is appropriate under proposed Sec. 668.8(k)(2)(ii)
and (iii) to require that a program must be considered to be offered in
clock hours if an institution is failing either to award the credit
hours that are in compliance with the definition of a credit hour in
proposed Sec. 600.2 or to ensure that students are attending at least
the minimum number of clock hours that are the basis for the credit
hours awarded for the program. A program that may qualify for
conversion to credit hours is still fundamentally a clock-hour program
that must meet additional requirements. If the provisions of proposed
Sec. 668.8(k)(1) and (2) are applicable, a program should not qualify
for conversion to credit hours because the program's essential nature
as a clock-hour program requires that it be measured in clock hours for
other purposes or because it fails to be offered in a manner that
supports the conversion.
In response to some non-Federal negotiators' concerns, proposed
Sec. 668.8(k)(3) would clarify the requirements in proposed Sec.
668.8(k)(2)(i) by providing that proposed Sec. 668.8(k)(2)(i) would
not apply if a limited portion of a program such as a practicum,
internship, or clinical experience component must be measured in clock
hours due to a State or Federal approval or licensure requirement. We
agree with the non-Federal negotiators that such a limited requirement
should not be an impediment to the program qualifying for a clock-to-
credit-hour conversion.
The negotiators reached tentative agreement on proposed Sec.
668.8(l) and (k), except for proposed Sec. 668.8(k)(2)(iii) which has
been changed to provide that an institution must require attendance in
the clock hours that are the basis for the credit hours awarded, except
as provided in current Sec. 668.4(e). We believe the change assures
that the clock hours are being offered and that students are attending
the clock hours that are the basis for the clock-to-credit-hour
conversion.
State Authorization (Sec. Sec. 600.4(a)(3), 600.5(a)(4), 600.6(a)(3),
and 600.9)
Statute: Section 101(a)(2) of the HEA defines the term
``institution of higher education'' to mean, in part, an educational
institution in any State that is legally authorized within the State to
provide a program of education beyond secondary education. Section
102(a) of the HEA provides, by reference to section 101(a)(2) of the
HEA, that a proprietary institution of higher education and a
postsecondary vocational institution must be similarly authorized
within a State.
Current Regulations: The regulations do not define or describe the
statutory requirement that an institution must be legally authorized in
a State.
Proposed Regulations: Under proposed Sec. 600.9, an institution
would be legally authorized by a State through a charter, license,
approval, or other document issued by a State government agency or
State entity that affirms or conveys the authority to the institution
to operate educational programs beyond secondary education. An
institution would also be considered legally authorized in a State if
the institution were authorized to offer programs beyond secondary
education by the Federal Government or an Indian Tribe as that term is
described in 25 U.S.C. 1802(2) or if it were exempt from State
authorization as a religious institution under the State constitution.
The Secretary would consider an institution to be legally
authorized by a State if (1) the authorization is given to the
institution specifically to offer programs beyond secondary education,
(2) the authorization is subject to adverse action by the State, and
(3) the State has a process to review and appropriately act on
complaints concerning an institution and enforces applicable State
laws.
References to Sec. 600.9 would be added for clarity in Sec. Sec.
600.4(a)(3), 600.5(a)(4), and 600.6(a)(3).
Reasons: The HEA requires institutions to have approval from the
States where they operate to provide postsecondary educational
programs. State oversight through obtaining approval to offer
postsecondary
[[Page 34813]]
education and by State regulatory agency ongoing activities plays an
important role in protecting students, although there may be a lot of
variation in how those responsibilities are exercised. One indicator of
the importance of State oversight has been seen in the movement of
substandard institutions and diploma mills from State to State in
response to changing requirements. These entities set up operation in
States that may initially provide very little oversight and operate
until a State strengthens its oversight of those entities in response
to complaints from the public. In some cases, those entities simply
move to another State that appears to offer little oversight and
repeats the process.
The Department historically viewed the requirement for State
authorization for entities to offer postsecondary education as minimal,
and would deem an entity that had been exempted by its State from State
oversight to have such approval so long as it was able to operate
within the State. Thus, in some States an institution was considered to
be legally authorized to offer postsecondary education based on such
methods as a business license or establishment as an eleemosynary
organization.
Upon further review, we believe the better approach is to view the
State approval to offer postsecondary educational programs as a
substantive requirement where the State is expected to take an active
role in approving an institution and monitoring complaints from the
public about its operations and responding appropriately. The weakness
of the historical approach of not requiring active State approval and
oversight may have contributed to the recent lapse in the existence of
California's Bureau for Private Postsecondary and Vocational Education.
The Bureau served as the State's oversight and regulatory agency for
private proprietary postsecondary institutions until the State
legislature eliminated the Bureau. We were advised that the Bureau was
permitted to lapse because the State determined that doing so would not
immediately harm the institutions that participate in the title IV, HEA
programs. During the period when there was no State agency authorizing
private postsecondary institutions, these institutions continued to
participate in the title IV, HEA programs under some voluntary
agreements while the State legislature worked on creating a new
oversight agency. The proposed regulations, had they been in effect at
that time, would have required that the State keep in place the prior
oversight agency, or to designate a different State agency to perform
the required State functions during the transition to a new State
oversight agency. Otherwise, under the provisions of proposed Sec.
600.9(b), the affected institutions would have ceased to be considered
legally authorized by the State for Federal purposes when the prior
agency's existence lapsed and would have ceased to be eligible
institutions.
Additionally, we are concerned that some States are deferring all,
or nearly all, of their oversight responsibilities to accrediting
agencies for approval of educational institutions, or are providing
exemptions for a subset of institutions for other reasons. Since
accrediting agencies generally require that an institution be legally
operating in the State, we are concerned that the checks and balances
provided by the separate processes of accreditation and State legal
authorization are being compromised.
We initially proposed that State legal authorization be based on a
charter, license, or other document issued by an appropriate State
government agency providing the authority to an institution to operate
educational programs beyond secondary education and grant degrees
within the jurisdiction of the State or other documentation, issued by
an appropriate State government agency that authorizes, licenses, or
otherwise approves the institution to establish and operate within the
State nondegree programs that provide education and training beyond
secondary education. We also provided that State legal authorization
could include reciprocal agreements between appropriate State agencies.
In addition, for institutions in a State to be legally authorized, the
State would be expected to monitor (1) institutional academic quality,
potentially relying on accrediting agencies recognized by the
Secretary; (2) an institution's financial viability; and (3) compliance
with applicable State laws with respect to consumer protection and
other matters of State oversight.
In response to concerns from the non-Federal negotiators, we
clarified in proposed Sec. 600.9(a) that legal authorization could not
only be provided by an appropriate State agency, but also another State
entity, e.g., a State legislature or State constitution. We removed the
references to monitoring the quality of educational programs and
financial responsibility. We accepted the position of some of the non-
Federal negotiators who argued that these additional State requirements
could unnecessarily duplicate Federal or accrediting agency actions.
Similarly we accepted the position of some of the non-Federal
negotiators that States could enter into reciprocal agreements on an as
needed basis without regulations.
Also, in response to recommendations of the non-Federal
negotiators, we added provisions to clarify that an institution would
be considered to be legally authorized in a State if the institution is
authorized to offer educational programs beyond secondary education by
the Federal Government or, as defined in 25 U.S.C. 1802(2), an Indian
tribe or if it is exempt from State authorization as a religious
institution under the State constitution. In proposed Sec. 600.9(b),
we also further revised the bases under which we would consider an
institution to be legally authorized by a State. We would require that
the authorization must be specifically to offer programs beyond
secondary education and may not be merely of the type required to do
business in the State. We believe that this provision would remove any
ambiguity regarding the type of authorization acceptable to establish
institutional eligibility to participate in Federal programs. The
regulations also require an institution's legal authorization to be
subject to adverse action by the State, and that a State has a process
to review and appropriately act on complaints concerning an
institution, and to enforce applicable State laws. We believe these
additional conditions are necessary to establish minimal State
oversight for institutions to be considered legally authorized to offer
postsecondary education for purposes of qualifying as an eligible
institution for Federal programs.
The committee did not reach agreement on this issue. A few
negotiators objected to allowing States to continue to rely on an
institution's status with an outside entity, for example, accredited
status with a nationally recognized accrediting agency, as a basis for
State legal authorization and were also concerned that the proposed
regulations would no longer have a requirement that a State review an
institution's fiscal viability. The regulations do not prohibit a State
from relying in part upon an accrediting agency, but the State is still
required to perform certain functions itself. For example, an
institution's authorization must be subject to adverse action by a
State agency or other State entity, and the State must have a process
for a State agency to review and appropriately act on complaints
concerning an institution.
[[Page 34814]]
Part 668 Student Assistance General Provisions Coursework (Sec. 668.2)
Statute: None.
Current regulations: None
Proposed regulations: The proposed regulations would amend the
definition of ``full-time student'' in Sec. 668.2 to allow repeated
coursework to count towards a student enrollment status in term-based
programs.
Reasons: The current policy provides that a student enrolled in a
term-based program may not be paid for repeating a course unless the
student will receive credit for the coursework in addition to any
credits previously earned. The non-Federal negotiators were concerned
that institutions are unable to track this type of information without
doing a program audit of each individual student. We agreed and
proposed to amend the definition of full-time to provide that such
credits would count toward enrollment status and be eligible for
payment under the title IV, HEA programs.
The negotiators reached tentative agreement on this issue.
Written Arrangements (Sec. Sec. 668.5 and 668.43)
Statute: None.
Current Regulations: Under current Sec. 668.5(a), an eligible
institution may enter into a written agreement with another eligible
institution, or with a consortium of eligible institutions, to provide
all or part of an educational program. The educational program is
considered to be an eligible program if it meets the requirements of
Sec. 668.8. There is no requirement in either Sec. 668.5 or Sec.
668.43 of the current regulations that institutions provide information
on written arrangements to enrolled or prospective students.
Proposed Regulations: The Department proposes to amend current
Sec. 668.5(a) by revising and redesignating paragraph (a) as paragraph
(a)(1) and adding a new paragraph (a)(2). Proposed Sec. 668.5(a)(1)
would be based on the language that is in current paragraph (a), but it
would be modified to make it consistent with the definition of an
``educational program'' in 34 CFR 600.2. Proposed new Sec. 668.5(a)(2)
would specify that if a written arrangement is between two or more
eligible institutions that are owned or controlled by the same
individual, partnership, or corporation, the institution that grants
the degree or certificate must provide more than 50 percent of the
educational program. These clarifications are also intended to ensure
that the institution enrolling the student has all necessary approvals
to offer an educational program in the format in which it is being
provided, such as through distance education, when the other
institution is providing instruction under a written agreement using
that method of delivery. Proposed Sec. 668.5(c)(1) would expand the
list of conditions that would preclude an arrangement between an
eligible institution and an ineligible institution. Proposed Sec. Sec.
668.5(e) and 668.43 would require an institution that enters into a
written arrangement to provide a description of the arrangement to
enrolled and prospective students.
Reasons: Under the definition of an ``educational program'' in 34
CFR 600.2, if an institution does not provide any instruction itself,
but merely gives credit for instruction provided by other institutions,
it is not considered to provide an educational program. The change
reflected in proposed Sec. 668.5(a)(1) would eliminate the
inconsistency in these two provisions by clarifying that an institution
may provide part, but not all, of an educational program under a
written arrangement.
Proposed Sec. 668.5(a)(2) would be added to address concerns that
may arise when two institutions under common ownership enter into
written arrangements with each other. One concern, for example, is that
such written agreements between institutions under common ownership
could be used to circumvent regulations governing cohort default rates
and ``90-10'' provisions, which limit the percentage of revenue for-
profit institutions may receive from the Federal student financial
assistance programs, by having one institution provide substantially
all of a program while attributing the title IV revenue and cohort
default rates to the other commonly-owned institution. In other
situations, campus-based institutions have been used as ``portals'' to
attract students for online institutions under common ownership where
students may not have expected the program to be offered by a different
institution.
During the negotiated rulemaking sessions, the Department initially
proposed draft regulations that would have required accrediting or
State agency review of any written arrangement between an eligible
institution and another eligible institution or consortium of eligible
institutions if the portion of the educational program provided by the
other institution under the written arrangement were more than 50
percent. Under this initial proposal, the institution's accrediting
agency, or State agency, as applicable, would have been required to
make a determination that the arrangement met the agency's standards
for written arrangements. This initial proposal was based on discussion
at the first negotiated rulemaking session that suggested most
accrediting agencies already review a significant portion of their
institutions' written arrangements, even those between or among
eligible institutions. Subsequently, several non-Federal negotiators
explained that, contrary to the Department's initial understanding,
this type of review of written arrangements was not common practice.
Some of the non-Federal negotiators expressed concerns that the
proposed changes would increase workload and costs as well as impede
the development of innovative programs at institutions where there is
no evidence of the problems the Department seeks to address. After
hearing these concerns, the Department reconsidered its initial
proposal and focused its proposed regulatory changes more narrowly on
the types of institutions and situations where problems have been
identified.
The Department subsequently proposed regulatory language that would
limit the portion of an educational program that could be provided
under a written arrangement between two eligible for-profit
institutions under common ownership or control to 25 percent.
While some non-Federal negotiators expressed support for the 25
percent limitation, a number of them expressed concern that the 25
percent limitation was too low. For example, one non-Federal negotiator
questioned the rationale for limiting the percentage of an educational
program provided by two eligible institutions under a written
arrangement to 25 percent when, under certain circumstances, current
regulations permit an ineligible institution to provide up to 50
percent of an educational program. Another non-Federal negotiator said
that an institution should be responsible for at least 50 percent of
the courses in a student's major. During the discussions, several non-
Federal negotiators supported an overall limitation of 50 percent. One
non-Federal negotiator expressed the view that non-profit institutions
want to ``own'' the degrees they confer, and if an institution provides
less than 50 percent of an educational program, it does not own the
degree. Other non-Federal negotiators argued that a limitation of 75
percent would be more appropriate.
Non-Federal negotiators also expressed concerns that, as proposed,
this restriction would have an impact on students' academic
opportunities and
[[Page 34815]]
would limit access to students attending certain institutions.
Specifically, they explained that the proposed restrictions on the
portion of the educational program that could be provided by the other
eligible institution could unnecessarily limit the number of online
courses students could take, or make it difficult for students in the
military who are deployed, and want to take their remaining courses at
an online institution, to finish their educational programs. Both
Department officials and some of the non-Federal negotiators pointed
out that these outcomes are avoidable if the students in these
situations transferred to the institution that was providing the
preponderance of courses.
Based on these discussions, the Department modified the proposed
regulatory language to refer to eligible institutions that are owned or
controlled by the same individual, partnership, or corporation, because
this language would be parallel to the language in current Sec.
668.5(c)(3)(ii)(B). Some non-Federal negotiators expressed concern that
the phrase ``owned or controlled by the same individual, partnership,
or corporation'' could be read to apply to Jesuit institutions or other
institutions under the control of a religious organization, or to
institutions in a public system under the control of a board of
governors. The Federal negotiator explained that it is not the
Department's intention for either public or private, non-profit
institutions to be covered by the proposed language because these
institutions are not owned or controlled by other entities, and
generally act autonomously.
The proposed additions to Sec. 668.5(c)(1) would make it clear
that educational programs offered under written arrangements between an
eligible institution and an ineligible institution would not be
considered eligible programs if the ineligible institution had had its
certification to participate in the title IV, HEA programs revoked (see
proposed Sec. 668.5(c)(1)(iii)), its application for re-certification
to participate in the title IV, HEA programs denied (see proposed Sec.
668.5(c)(1)(iv)), or its application for certification to participate
in the title IV, HEA programs denied (see proposed Sec.
668.5(c)(1)(v)). These additions are consistent with the existing
reference in the regulations to institutions that have been terminated
from the title IV, HEA programs.
Finally, there was considerable discussion during the negotiated
rulemaking sessions about the Department's proposal to require that
institutions make information about written arrangements available to
students. Several non-Federal negotiators said that information should
be made available to prospective students, as well as to enrolled
students, so prospective students could know before applying to an
educational program whether any part of the program would be provided
under a written arrangement. For this reason, proposed Sec. 668.5(e)
would make clear that any eligible institution providing educational
programs under a written arrangement is required to provide the
information described in proposed Sec. 668.43(a)(12) to both
prospective and enrolled students.
The committee also discussed at length what content the proposed
disclosures should include. Several non-Federal negotiators requested
that institutions be required to disclose the locations of the other
institutions or organizations at which a portion of the educational
program would be provided. We agreed with these non-Federal negotiators
and incorporated this disclosure requirement in proposed Sec.
668.43(a)(12)(ii).
There was also widespread support for requiring the disclosure of
any additional costs that students might incur as a result of enrolling
in an educational program provided, in part, under a written
arrangement. There was much discussion about which costs would need to
be disclosed. One non-Federal negotiator requested that institutions
only be required to provide ``estimated'' costs, given that in some
situations, such as study abroad programs, costs might change due to
variability in living accommodations, changes in airfare for programs
offered at distant locations, etc. We agreed with these suggestions and
clarified in proposed Sec. 668.43(a)(12)(iv) that the required
disclosures include estimated additional costs students may incur as
the result of enrolling in an educational program that is provided, in
part, under a written arrangement described in Sec. 668.5.
In proposed Sec. 668.43(a)(12)(iii), we would require institutions
to disclose the method of delivery of the portion of the educational
program that the institution that grants the degree or certificate is
not providing so potential students are given accurate information. In
response to a question raised at one of the negotiated rulemaking
sessions, the Federal negotiator explained that the Department would
expect an institution to disclose whether the instruction is offered on
campus or on-line, or offered through a combination of methods.
During the discussions about the disclosure requirements in
proposed Sec. Sec. 668.5 and 668.43, there were a number of questions
about what types of arrangements would be subject to these proposed
requirements. The Department explained that the proposed disclosure
requirements would apply to blanket, existing arrangements between or
among institutions. Individual, student-initiated written arrangements
would not be subject to the disclosure requirements in proposed
Sec. Sec. 668.5 and 668.43. Not only would such disclosures be
impractical and excessively burdensome, but they would also be
unnecessary: As a party to an individual, student-initiated written
arrangement, the student would already have the information required to
be disclosed under these proposed provisions. In addition, these
proposed disclosure requirements would not apply to internships or
externships because the Department does not consider these arrangements
to be written arrangements under Sec. 668.5. While it is reasonable to
expect that institutions that offer or require internships and
externships will provide students in affected programs with the types
of information described in proposed Sec. 668.43(a)(12), such programs
would not be covered under this proposed requirement for institutional
disclosure of written arrangements.
Some non-Federal negotiators contended that institutions should be
required to display the information described in proposed Sec.
668.43(a)(12) prominently on their Web sites. Other non-Federal
negotiators did not support this idea, pointing out that Sec. 668.43
contains a long list of disclosures, and to single out this one
disclosure requirement for special treatment would suggest that it is
more important than all the other institutional information disclosure
requirements. They explained that this proposed requirement should be
considered in the context of all the consumer disclosure requirements
regarding information that students need to know when they are
considering enrolling in an institution, and noted that from a
practical standpoint, it is likely that institutions will post the
required information on their Web sites. One non-Federal negotiator
expressed the concern that there is already too much general
information provided to students that they do not read, and suggested
that institutions might find it most useful to include information on
written arrangements in the context of individual programs of study.
While the Department wants to make sure students receive
appropriate information so they can make informed decisions, the
Department agrees with
[[Page 34816]]
the non-Federal negotiators who urged that institutions be given the
discretion to determine the best way to disseminate the required
information to their students.
The negotiators reached tentative agreement on this issue.
Incentive Compensation (Sec. 668.14(b))
Statute: Section 487(a)(20) of the HEA requires that the title IV,
HEA program participation agreement prohibit an institution from making
any commission, bonus, or other incentive payments based directly or
indirectly on success in securing enrollments or financial aid to any
persons or entities involved in student recruiting or admissions
activities, or in making decisions about the award of student financial
assistance. The statute states that this prohibition does not apply to
the recruitment of foreign students residing in foreign countries who
are not eligible to receive Federal financial assistance.
Current Regulations: Current Sec. 668.14(b)(22)(i) incorporates
the prohibition and exception reflected in section 487(a)(20) of the
HEA. It prohibits an institution from making any commission, bonus, or
other incentive payments based directly or indirectly on success in
securing enrollments or financial aid to any persons or entities
involved in student recruiting or admissions activities, or in making
decisions about the award of student financial assistance. It also
states that this restriction does not apply to the recruitment of
foreign students living in foreign countries who are not eligible to
receive Federal student aid.
Current Sec. 668.14(b)(22)(ii) goes on to specify 12 ``safe
harbors''--12 activities and arrangements that an institution may carry
out without violating the prohibition against incentive compensation
reflected in section 487(a)(20) of the HEA and current Sec.
668.14(b)(22)(i). The first safe harbor explains the conditions under
which an institution may adjust compensation without that compensation
being considered an incentive payment. The 12 safe harbors describe the
conditions under which payments that could potentially be construed as
based upon securing enrollments or financial aid are nonetheless not
prohibited under section 487(a)(20) of the HEA and current Sec.
668.14(b)(22)(i).
The payment or compensation plans covered by the safe harbors
address the following subjects:
1. Adjustments to employee compensation (current Sec.
668.14(b)(22)(i)(A)). Under this safe harbor, an institution may make
up to two adjustments (upward or downward) to a covered employee's
annual salary or fixed hourly wage rate within any 12-month period
without the adjustment being considered an incentive payment, provided
that no adjustment is based solely on the number of students recruited,
admitted, enrolled, or awarded financial aid. This safe harbor also
permits one cost-of-living increase that is paid to all or
substantially all of the institution's full-time employees.
2. Enrollment in programs that are not eligible for title IV, HEA
program funds (current Sec. 668.14(b)(22)(i)(B)). This safe harbor
permits compensation to recruiters based upon enrollment of students
who enroll in programs that are ineligible for title IV, HEA funds.
3. Contracts with employers to provide training (current Sec.
668.14(b)(22)(i)(C)). This safe harbor addresses payments to recruiters
who arrange contracts between an institution and an employer, where the
employer pays the tuition and fees for its employees (either directly
to the institution or by reimbursement to the employee).
4. Profit-sharing bonus plans (current Sec. 668.14(b)(22)(i)(D)).
Under this safe harbor, profit-sharing and bonus payments to all or
substantially all of an institution's full-time employees are not
considered incentive payments based on success in securing enrollments
or awarding financial aid in violation of the prohibition in section
487(a)(20) of the HEA and current Sec. 668.14(b)(22)(i). As long as
the profit-sharing or bonus payments are substantially the same amount
or the same percentage of salary or wages, and as long as the payments
are made to all or substantially all of the institution's full-time
professional and administrative staff, compensation paid as part of a
profit-sharing or bonus plan is not considered a violation of the
incentive payment prohibition.
5. Compensation based upon program completion (current Sec.
668.14(b)(22)(i)(E)). This safe harbor permits compensation based upon
students successfully completing their educational programs or one
academic year of their educational programs, whichever is shorter.
6. Pre-enrollment activities (current Sec. 668.14(b)(22)(i)(F)).
This safe harbor states that clerical pre-enrollment activities, such
as answering telephone calls, referring inquiries, or distributing
institutional materials, are not considered recruitment or admission
activities. Accordingly, under this safe harbor, an institution may
make incentive payments to individuals whose responsibilities are
limited to clerical pre-enrollment activities.
7. Managerial and supervisory employees (current Sec.
668.14(b)(22)(i)(G)). This safe harbor states that the incentive
payment prohibition in section 487(a)(20) of the HEA and current Sec.
668.14(b)(22)(i) does not apply to managerial and supervisory employees
who do not directly manage or supervise employees who are directly
involved in recruiting or admissions activities, or the awarding of
title IV, HEA program funds.
8. Token gifts (current Sec. 668.14(b)(22)(i)(H)). Under this safe
harbor, an institution may provide a token gift not to exceed $100 to
an alumnus or student provided that the gift is not in the form of
money and no more than one gift is provided annually to an individual.
9. Profit distributions (current Sec. 668.14(b)(22)(i)(I)). This
safe harbor states that profit distributions to owners of the
institution are not payments based on success in securing enrollments
or awarding financial aid in violation of the prohibition in section
487(a)(20) of the HEA and current Sec. 668.14(b)(22)(i) as long as the
distribution represents a proportionate share of the profits based upon
the individual's ownership interest.
10. Internet-based activities (current Sec. 668.14(b)(22)(i)(J)).
This safe harbor permits an institution to award incentive compensation
for Internet-based recruitment and admission activities that provide
information about the institution to prospective students, refer
prospective students to the institution, or permit prospective students
to apply for admission online.
11. Payments to third parties for non-recruitment activities
(current Sec. 668.14(b)(22)(i)(K)). This safe harbor states that the
incentive compensation prohibition does not apply to payments to third
parties, including tuition sharing arrangements, that deliver various
services to the institution, provided that none of the services involve
recruiting or admission activities, or the awarding of title IV, HEA
program funds.
12. Payments to third parties for recruitment activities (current
Sec. 668.14(b)(22)(i)(L)). Under this safe harbor, if an institution
uses an outside entity to perform activities for it, including
recruitment or admission activities, the institution may make incentive
payments to the third party without violating the incentive payment
prohibition in section 487(a)(20) of the HEA and current Sec.
668.14(b)(22)(i) as long as the individuals performing the recruitment
or admission activities are not compensated in a way that is
[[Page 34817]]
prohibited by section 487(a)(20) of the HEA and current Sec.
668.14(b)(22)(i).
Proposed Regulations: The Department proposes to revise Sec.
668.14(b)(22) to align it more closely with the statutory language from
section 487(a)(20) of the HEA. Specifically, proposed Sec.
668.14(b)(22)(i)(A) would restate the statutory provision in the HEA,
which provides that to be eligible to participate in the Federal
student financial aid programs authorized under title IV of the HEA, an
institution must agree that it will not provide any commission, bonus,
or other incentive payment based directly or indirectly on success in
securing enrollments or financial aid to any person or entity engaged
in any student recruiting or admission activities or in making
decisions regarding the award of student financial assistance. Proposed
Sec. 668.14(b)(22)(i)(B) would provide that the incentive compensation
prohibition does not apply to the recruitment of foreign students
residing in foreign countries who are not eligible to receive Federal
student assistance.
The Department would delete the 12 safe harbors reflected in
current Sec. 668.14(b)(22)(ii). The Department would, however,
clarify, in proposed Sec. 668.14(b)(22)(ii), that eligible
institutions and their contractors may make merit-based adjustments to
employee compensation, provided that such adjustments are not based
directly or indirectly upon success in securing enrollments or the
award of financial aid.
Finally, in proposed Sec. 668.14(b)(22)(iii), the Department would
define the following key terms that would be used in proposed Sec.
668.14(b)(22): Commission, bonus, or other incentive payment, securing
enrollments or the awards of financial aid, and enrollment.
Proposed Sec. 668.14(b)(22)(iii)(A) would define commission,
bonus, or other incentive payment as a sum of money or something of
value paid or given to a person or entity for services rendered.
Proposed Sec. 668.14(b)(22)(iii)(B) would define securing
enrollments or the awards of financial aid as activities that a person
or entity engages in for the purpose of the admission or matriculation
of students for any period of time or the award of financial aid to
students. Proposed Sec. 668.14(b)(22)(iii)(B)(1) and
(b)(22)(iii)(B)(2) would clarify that the term securing enrollments or
the awards of financial aid includes recruitment contact in any form
and excludes making a payment to a third party for student contact
information for prospective students, respectively.
Proposed Sec. 668.14(b)(22)(iii)(C) would define enrollment as the
admission or matriculation of a student into an eligible institution.
Reasons: Consistent with comments made by a majority of the non-
Federal negotiators, the Department believes that the language in
section 487(a)(20) of the HEA is clear, and that the elimination of all
of the regulatory safe harbors reflected in current Sec.
668.14(b)(22)(ii) would best serve to effectuate congressional intent.
The Department previously explained that it was adopting the safe
harbors based on a ``purposive reading of section 487(a)(20) of the
HEA.'' 67 FR 51723 (August 8, 2002). Since that time, however, the
Department's experience demonstrates that unscrupulous actors routinely
rely upon these safe harbors to circumvent the intent of section
487(a)(20) of the HEA. As such, rather than serving to effectuate the
goals intended by Congress through its adoption of section 487(a)(20)
of the HEA, the safe harbors have served to obstruct those objectives.
For example, the first safe harbor, which prohibits the payment of
incentives based solely upon success in securing enrollments, has led
institutions to establish, on paper, other factors that are purportedly
used to evaluate student recruiters other than the sheer numbers of
students enrolled. However, in practice, consideration of these factors
has been minimal at best, or otherwise indiscernible. This has led the
Department to expend vast resources evaluating the legitimacy of
institutional compensation plans, and considerable time and effort has
been lost by both the Department and institutions engaged in
litigation. Moreover, the Department believes that students are
frequently the victims of compensation plans that institutions have
adopted within the ambit of the first safe harbor. When admissions
personnel are compensated substantially, if not entirely, upon the
numbers of students enrolled, the incentive to deceive or misrepresent
the manner in which a particular educational program meets a student's
need increases substantially. As a result, the Department believes that
the existence of the safe harbors is a major impediment to ensuring
that students are enrolled in educational programs that are meaningful
to them. There was considerable discussion on this proposed approach
during the negotiated rulemaking sessions.
At the outset of the discussions on incentive compensation during
negotiated rulemaking, the Department reviewed each of the 12 safe
harbors reflected in the current regulations and stated why the
Department views them as either inappropriate or unnecessary:
1. Adjustments to employee compensation. The Department explained
that this safe harbor has led to allegations in which institutions
concede that their compensation structures include consideration of the
number of enrolled students, but aver that they are not solely based
upon such numbers. In some of these instances, the substantial weight
of the evidence has suggested that the other factors purportedly
analyzed are not truly considered, and that, in reality, the
institution bases salaries exclusively upon the number of students
enrolled. For this reason, the Department proposes to delete this safe
harbor. After careful consideration, the Department has determined that
removal of the safe harbor is preferable to trying to revise the safe
harbor. For example, changing the word solely in this safe harbor to
some other modifier, such as ``primarily'' or ``substantially,'' would
not correct the problem, as the evaluation of any alternative
arrangement would merely shift to whether the compensation was
``primarily'' or ``substantially'' based upon enrollments.
2. Compensation related to enrollment in programs that are not
eligible for title IV, HEA program funds. Section 487(a)(20) of the HEA
provides that compensation may not be based upon success in securing
enrollments whether the students receive title IV, HEA funds, or some
other form of student financial assistance. This safe harbor provides
an impetus to steer students away from title IV, HEA programs. The
potential also exists for manipulation, as students who were initially
enrolled in non-title IV, HEA eligible programs may then be re-enrolled
in title IV, HEA eligible programs. As a result, the Department
proposes to remove this safe harbor.
3. Compensation related to contracts with employers to provide
training. Compensation permitted under this safe harbor includes
compensation that is ultimately based upon success in securing
enrollments, and is thus inconsistent with section 487(a)(20) of the
HEA.
4. Compensation related to profit-sharing bonus plans. There is no
statutory proscription upon offering employees either profit-sharing or
a bonus; however, if either is based upon success in securing
enrollments, it is not permitted. Therefore, this safe harbor is
unnecessary.
5. Compensation based on program completion. The Department
believes that this safe harbor permits compensation that is
``indirectly'' based
[[Page 34818]]
upon securing enrollments--that is, unless the student enrolls, the
student cannot successfully complete an educational program. With the
proliferation of short-time, accelerated programs, the potential exists
for shorter and shorter programs, and increased efforts to rely upon
this safe harbor to incentivize recruiters. Moreover, this safe harbor
may lead to lowered or misrepresented admissions standards and program
offerings, lowered academic progress standards, altered attendance
records, and a lack of meaningful emphasis on retention. The Department
has seen schools that have devised and operated grading policies that
all but ensure that students who enroll will graduate, regardless of
their academic performance. For these reasons, the Department believes
it is appropriate to delete this safe harbor.
6. Compensation related to pre-enrollment activities. The
Department does not believe that this safe harbor is appropriate.
Individuals may not receive incentive compensation based on their
success in soliciting students for interviews; soliciting students for
interviews is a recruitment activity, not a pre-enrollment activity. In
addition, because a recruiter's job description is to recruit, it would
be very difficult for an institution to document that it was paying a
bonus to a recruiter solely for clerical pre-enrollment activities.
Such activities certainly contribute ``indirectly,'' if not
``directly,'' to the success in securing enrollments, and hence
compensation based upon them is prohibited by the statute. Moreover,
with the elimination of the safe harbor relating to adjustments to
employee compensation, an unscrupulous actor could claim that the
activities in which its recruiters engaged, and for which they were
compensated, consisted of ``clerical'' or ``pre-enrollment''
activities, regardless of whether a student ultimately enrolled.
7. Compensation related to managerial and supervisory employees.
The Department believes that this safe harbor provision is no longer
appropriate because senior management may drive the organizational and
operational culture at an institution, creating pressures for top, and
even middle, management to secure increasing numbers of enrollments
from their recruiters. As a result, these individuals should not be
exempt from the ban on receiving incentive compensation.
8. Compensation related to token gifts. As at least one non-Federal
negotiator noted, students oft-times do things with little reflection
if it brings an immediate reward, and such things as a $100 gift card
constitute a substantial incentive for many students. Further, the fair
market value of an item might be considerably greater than its cost. A
high value item for which the institution paid a minimal cost could not
be considered a token gift. As a result, even the provision of token
gifts to students and alumni is fraught with the potential for abuse,
creating the need to remove this safe harbor, as well.
9. Compensation based on profit distributions that are based on an
individual's ownership interest. Section 487(a)(20) of the HEA
prohibits compensation, including profit distributions, that is based
upon success in securing enrollments and the award of financial aid. It
does not prohibit profit distributions based upon an individual's
ownership interest. As a result, it is the Department's view that this
safe harbor is unnecessary.
10. Compensation related to Internet-based activities.
Technological advancements and developments in Internet-based
activities since this safe harbor was adopted, and the frequency with
which such activities are now relied upon, argue against the continued
provision of this safe harbor. Moreover, with the elimination of the
first safe harbor, it can be anticipated that an institution seeking to
avoid compliance with section 487(a)(20) of the HEA will maximize its
Internet-based recruitment activities. For this reason, the Department
proposes to remove this safe harbor.
11. Compensation to third parties for non-recruitment activities.
The Department believes that this safe harbor is no longer necessary.
Proposed Sec. 668.14(b)(22) states that a person or entity who is
engaged in any student recruitment or admission activity, or in making
decisions regarding the awarding of title IV, HEA program funds may not
be compensated directly or indirectly based upon the success in
securing enrollments. Thus, there is no reason to provide any
discussion of third-party activities as they relate to non-recruitment
activities as a potential safe harbor.
12. Compensation to third parties for recruitment activities. This
safe harbor expands the scope of the eleventh safe harbor to include
``recruiting or admission activities,'' while providing the caveat that
the compensation cannot be offered in an otherwise legally
impermissible manner. As mentioned in regard to the eleventh safe
harbor, section 487(a)(20) of the HEA expressly proscribes payments to
``any persons or entities'' based directly or indirectly on success in
securing enrollments, so any further discussion of third party
activities as they relate to recruitment activities is also
unnecessary.
The Department believes that removal of these regulatory safe
harbors is necessary to ensure that section 487(a)(20) of the HEA is
properly applied. The Department has determined that these safe harbors
do substantially more harm than good, and believes that institutions
should not look to safe harbors to determine whether a payment complies
with section 487(a)(20) of the HEA. Rather, the Department believes
that institutions can readily determine if a payment or compensation is
permissible under section 487(a)(20) of the HEA by analyzing--
(1) Whether it is a commission, bonus, or other incentive payment,
defined as an award of a sum of money or something of value paid to or
given to a person or entity for services rendered; and
(2) Whether the commission, bonus, or other incentive payment is
provided to any person based directly or indirectly upon success in
securing enrollments or the award of financial aid, which are defined
as activities engaged in for the purpose of the admission or
matriculation of students for any period of time or the award of
financial aid.
If the answer to each of these questions is yes, the commission,
bonus, or incentive payment would not be permitted under the statute.
Therefore, the Department proposes to simplify its regulations to
better align them with section 487(a)(20) of the HEA.
Most non-Federal negotiators favored the Department's proposal to
remove the current safe harbors because they believe that the
regulatory safe harbors have led to inappropriate incentive
compensation practices by institutions that are prohibited by the HEA.
The majority of the non-Federal negotiators indicated strong support
for the removal of these safe harbors, believing that doing so would
more accurately reflect congressional intent and protect students from
abusive recruitment practices that have directly resulted when
institutions have sought to circumvent, if not directly flaunt, section
487(a)(20) of the HEA.
The non-Federal negotiator who opposed the Department's proposed
removal of the safe harbors and their replacement with certain
definitions argued that the safe harbors are needed to explain the
scope of the prohibition in section 487(a)(20) of the HEA, which was
perceived as being unclear. Without the safe harbors, it was argued,
institutions would not have a clear sense of what practices are
permitted
[[Page 34819]]
and, therefore, would be more likely to unintentionally violate the
prohibition in section 487(a)(20) of the HEA and Sec. 668.14(b)(22).
However, any merit to this argument is belied by the ease of the
application of the two-part test the Department has offered that will
demonstrate whether a compensation plan or payment complies with the
statute and its implementing regulations.
A sub-caucus of non-Federal negotiators worked between the second
session of negotiated rulemaking and the third session of negotiated
rulemaking to develop draft regulatory language that would retain, but
narrow the scope of, the safe harbors in the current regulations. There
was much discussion regarding the sub-caucus' proposed draft language,
as well as one final counter-proposal brought to the negotiating table.
A number of specific concerns were raised during these discussions.
First and foremost, negotiators wanted to understand what the likely
impact would be if the safe harbors were removed from the regulations.
They questioned whether all previously permitted actions would now be
prohibited. The Department explained its position: That, going forward,
under the proposed regulations, institutions would need to re-examine
their practices to ensure that they comply with proposed Sec.
668.14(b)(22). To the extent that a safe harbor created an exception to
the statutory prohibition found in section 487(a)(20) of the HEA, its
removal would establish that such an exception no longer exists, and
that the action that had been permitted is now prohibited.
Several negotiators were concerned that under the Department's
proposal, institutions would be prohibited from paying merit-based
increases to their financial aid or admissions personnel. In
particular, some negotiators supported the inclusion of language that
would permit an institution to make merit-based adjustments based on an
employee's performance in relation to an institution's goals, such as
those for enrollment, completion, or graduation.
The Department's proposed regulations continue to authorize merit-
based compensation for financial aid or admissions staff. An
institution could use a variety of standard evaluative factors as the
basis for such an increase; however, consistent with section 487(a)(20)
of the HEA, under proposed Sec. 668.14(b)(22), it would not be
permitted to consider the employee's success in securing student
enrollments or the award of financial aid or institutional goals based
on that success among those factors. Further, an increase that is based
either directly or indirectly on individual student numbers would be
prohibited. The Department believes that the language in proposed Sec.
668.14(b)(22)(ii) makes this clear.
One negotiator felt strongly that it was critical to use the word
``solely,'' or some other modifier, to limit the prohibition in
proposed Sec. 668.14(b)(22)(i) (i.e., ``It will not provide any
commission, bonus, or other incentive payment based solely upon success
* * *'' rather than ``It will not provide any commission, bonus, or
other incentive payment based directly or indirectly upon success'').
This negotiator said that the use of the word solely, or some other
modifier, would be consistent with the use of that term solely in the
first safe harbor reflected in current Sec. 668.14(b)(22)(ii)(A)
(i.e., `` * * * is not based solely on the number of students
recruited, admitted, enrolled, or awarded financial aid''). As
discussed earlier in this preamble, given the Department's experience
with how the first safe harbor in current Sec. 668.14(b)(22) has been
abused, the Department does not believe that such a construction is
warranted. It is the Department's view that, consistent with section
487(a)(20) of the HEA, incentive payments should not be based in any
part, directly or indirectly, on success in securing enrollments or the
awards of financial aid.
In addition, some negotiators advocated for an institution's
ability to pay bonuses on the basis of students who complete their
programs of instruction, as currently provided for in the fifth safe
harbor. They believed that this category of students (i.e., students
who complete their programs), is different from the category of
students who enroll, for which compensation may not be based. The
Department does not agree. As previously stated, the Department
believes that the regulations must clearly reinforce the statutory
provision and exclude the possibility of basing any portion of a bonus
on success in securing student enrollments or financial aid awards.
Several negotiators requested that the Department define the term
``bonus'' as a way to help institutions understand what types of
compensation are appropriate. Accordingly, in proposed Sec.
668.14(b)(22)(iii)(A), the Department proposes to define the term
commission, bonus, or other incentive payment as a sum of money or
something of value paid to or given to a person or an entity for
services rendered. Linked to the language in proposed Sec.
668.14(b)(22)(i)(A), this definition is unambiguous in prohibiting
payment of any money or item of value on the basis of direct or
indirect success in securing enrollments or the award of financial aid.
Several non-Federal negotiators asked for clarification about the
extent to which supervisors and upper level administrators would be
covered by proposed Sec. 668.14(b)(22). The Department's position is
that section 487(a)(20) of the HEA is clear that the incentive
compensation prohibition applies all the way to the top of an
institution or organization. Therefore, individuals who are engaged in
any student recruitment or admissions activity or in making decisions
about the award of student financial aid are covered by this
prohibition.
One negotiator asked the Department to clarify how the prohibition
reflected in proposed Sec. 668.14(b)(22) would work in the case of an
institution that partners with other institutions or organizations to
receive shared services, an approach that some institutions are turning
to for economic reasons. As an example, a group of institutions might
share a centralized campus security team because doing so could be less
expensive than having each institution set up its own team. If
institutions use this model of shared services for financial aid
purposes and the payment for the shared services is volume-driven
(e.g., an institution is billed based on the number of student files
that are processed), the negotiator asked if institutions would comply
with proposed Sec. 668.14(b)(22). The Department does not believe that
the proposed language would automatically preclude an institution's use
of this type of arrangement, provided that payment is not based on
success in securing enrollments or the awards of financial aid. In the
normal course, the contractor would be paid for services rendered
without violating the proposed regulations.
Several negotiators were concerned about the impact of the proposed
language on an institution's Internet-based activities. Negotiators
asserted that the HEA permits advertising and marketing activities by a
third party, as long as payment to the third party is based on those
who ``click'' and is not based on the number of individuals who enroll.
The Department agrees and does not believe that the proposed regulatory
language would prohibit such click-through payments.
The issue of token gifts prompted some discussion. Several
negotiators asked the Department to clarify whether an institution that
offers some type of payment to current students in exchange for their
contact list would
[[Page 34820]]
violate proposed Sec. 668.14(b)(22). The Department believes that this
type of activity is permitted as long as the student is not paid or
given an item of value on the basis of the number of students who apply
or enroll. Most negotiators agreed with this position.
Finally, several non-Federal negotiators asked whether the
Department would offer private letter guidance on conduct that may
violate proposed Sec. 668.14(b)(22). Accordingly, the Department
believes the proposed language is clear and reflective of section
487(a)(20) of the HEA. The Department believes it will appropriately
guide institutions as they evaluate compensation issues. To the extent
that ongoing questions arise on a particular aspect of the regulations,
the Department will respond appropriately. This response may include a
clarification in a Department publication, such as the Federal Student
Aid Handbook or a Dear Colleague Letter. The Department believes that
rather than focusing clarifying guidance on the situation at a
particular institution, any illuminating statements must be broadly
applicable and distributed widely to all participating institutions. As
a result, the Department does not intend to provide private guidance
regarding particular compensation structures in the future and will
enforce the law as written.
Negotiators did not reach agreement on this issue.
Satisfactory Academic Progress (Sec. Sec. 668.16(e), 668.32(f),
668.34)
Statute: Section 484(a)(2) of the HEA requires that a student make
satisfactory progress in the student's course of study in order to be
eligible to receive title IV, HEA program funds. Section 484(c) of the
HEA provides that a student is making satisfactory progress if the
institution reviews the progress of the student at the end of each
academic year, or its equivalent, and the student has a cumulative C
average, or its equivalent, or academic standing consistent with the
requirements for graduation, as determined by the institution, at the
end of the student's second academic year. Section 484(c)(2) of the HEA
provides that a student who has failed to maintain satisfactory
progress and, subsequent to that failure, has academic standing
consistent with the requirements for graduation, as determined by the
institution, may again be determined eligible for assistance under
title IV, HEA programs. Section 484(c)(3) of the HEA allows an
institution to waive the satisfactory progress provisions for undue
hardship based on the death of a relative of the student, the personal
injury or illness of the student, or special circumstances as
determined by the institution.
Current Regulations: Three sections in current regulations contain
satisfactory academic progress requirements. Current Sec. 668.16(e)
specifies that for an institution to be considered administratively
capable, it must, for the purpose of determining student eligibility,
establish, publish and apply reasonable standards for measuring whether
a student is maintaining satisfactory progress in his or her
educational program.
Under current Sec. 668.16(e), a satisfactory academic progress
policy is considered reasonable if the standards are the same as or
stricter than the institution's standards for students enrolled in the
same educational program who are not receiving title IV, HEA program
funds and contain both qualitative (grade-based) and quantitative
(time-related) standards. Under current Sec. 668.16(e)(3), the
institution must apply the standards consistently to all students
within each category of students, e.g., full-time, part-time,
undergraduate, and graduate students, and each educational program.
The policy must provide that the institution checks both
qualitative and quantitative components of the standards at the end of
each increment, which may not be longer than one half of the
educational program or one academic year, whichever is less.
Current Sec. 668.16(e)(5) and (e)(6) require that a satisfactory
academic policy provide specific procedures under which a student may
appeal a determination that the student is not making satisfactory
academic progress and specific procedures for a student to re-establish
that the student is making satisfactory academic progress.
Current Sec. 668.32 contains general student eligibility
requirements. Current paragraph (f) of this section specifies that to
be eligible to receive title IV, HEA program assistance, a student must
maintain satisfactory progress in his or her course of study under the
institution's published satisfactory progress standards. These
standards must comply with the provisions of Sec. 668.16(e) and, if
applicable, Sec. 668.34.
Current Sec. 668.34 specifies that a student who is enrolled in a
program of study that is longer than two academic years must, at the
end of the second year, have a grade point average (GPA) of at least a
``C'' or its equivalent, or have academic standing that is consistent
with the institution's graduation requirements. Under current Sec.
668.34(c), an institution may find that a student is making
satisfactory academic progress, even if the student does not meet these
requirements, if the student's failure to meet these requirements is
based upon the death of a relative of the student, an injury or illness
of the student, or other special circumstances. Current Sec. 668.34(e)
requires an institution to review a student's academic progress at the
end of each year, at a minimum.
Proposed regulations: The proposed regulations would restructure
the satisfactory academic progress requirements. Proposed Sec.
668.16(e) (Standards of administrative capability) would be revised to
include only the requirement that an institution establish, publish,
and apply satisfactory academic progress standards that meet the
requirements of Sec. 668.34. The remainder of current Sec. 668.16(e)
would be moved to proposed Sec. 668.34 such that it, alone, describes
all of the required elements of a satisfactory academic progress policy
as well as how an institution would implement such a policy. The
references in paragraph Sec. 668.32(e) would be updated to conform the
section with the changes proposed to Sec. Sec. 668.16(e) and 668.32.
Proposed Sec. 668.34(a) would specify the elements an
institution's satisfactory academic policy must contain to be
considered a reasonable policy. Under the proposed regulations,
institutions would continue to have flexibility in establishing their
own policies; institutions that choose to measure satisfactory academic
progress more frequently than at the minimum required intervals would
have additional flexibility (see proposed Sec. 668.34(a)(3)).
All of the policy elements in the current regulations under
Sec. Sec. 668.16(e) and 668.34 would be combined in proposed Sec.
668.34. In addition, proposed Sec. 668.34(a)(5) would make explicit
the requirement that institutions specify the pace at which a student
must progress through his or her educational program to ensure that the
student will complete the program within the maximum timeframe, and
provide for measurement of a student's pace at each evaluation. Under
proposed Sec. 668.34(a)(6), institutional policies would need to
describe how a student's GPA and pace of completion are affected by
transfers of credit from other institutions. This provision would also
require institutions to count credit hours from another institution
that are accepted toward a student's educational program as both
attempted and completed hours.
Proposed Sec. 668.34(a)(7) would provide that, except as permitted
in Sec. 668.34(c) and (d), the policy requires that, at the time of
each evaluation, if
[[Page 34821]]
the student is not making satisfactory academic progress, the student
is no longer eligible to receive title IV, HEA assistance.
Proposed Sec. 668.34(a)(8) would require institutions that use
``financial aid warning'' and ``financial aid probation'' statuses
(concepts that would be defined in proposed Sec. 668.34(b)) in
connection with satisfactory academic progress evaluations to describe
these statuses and how they are used in their satisfactory academic
progress policies. Proposed Sec. 668.34(a)(8)(i) would specify that a
student on financial aid warning may continue to receive assistance
under the title IV, HEA programs for one payment period despite a
determination that the student is not making satisfactory academic
progress. Financial aid warning status may be assigned without an
appeal or other action by the student. Proposed Sec. 668.34(a)(8)(ii)
would make clear that an institution with a satisfactory academic
progress policy that includes the use of the financial aid probation
status could require that a student on financial aid probation fulfill
specific terms and conditions, such as taking a reduced course load or
enrolling in specific courses.
Proposed Sec. 668.34(a)(9) would require an institution that
permits a student to appeal a determination that the student is not
making satisfactory academic progress to describe the appeal process in
its policy. The policy would need to contain specified elements.
Proposed Sec. 668.34(a)(9)(i) would require an institution to describe
how a student may re-establish his or her eligibility to receive
assistance under the title IV, HEA programs. Under proposed Sec.
668.34(a)(9)(ii), a student would be permitted to file an appeal based
on the death of a relative, an injury or illness of the student, or
other special circumstances. Under proposed Sec. 668.34(a)(9)(iii), a
student would be required to submit, as part of the appeal, information
regarding why the student failed to make satisfactory academic
progress, and what has changed in the student's situation that would
allow the student to demonstrate satisfactory academic progress at the
next evaluation.
Proposed Sec. 668.34(a)(10) would require the satisfactory
academic progress policy of an institution that does not permit
students to appeal a determination that they are not making
satisfactory academic progress to describe how a student may regain
eligibility for assistance under the title IV, HEA programs.
Proposed Sec. 668.34(a)(11) would require that an institution's
policy provide for notification to students of the results of an
evaluation that impacts the student's eligibility for title IV, HEA
program funds.
In proposed Sec. 668.34(b), we would define several important
terms that are used in this section:
We would define the term appeal as a process by which a student who
is not meeting the institution's standards petitions the institution
for reconsideration of the student's eligibility for title IV, HEA
program funds.
The term financial aid probation would be defined as a status
assigned by an institution to a student who fails to make satisfactory
academic progress and who has appealed and has had eligibility for aid
reinstated.
The term financial aid warning would be defined as a status
assigned to a student who fails to make satisfactory academic progress
at an institution that evaluates academic progress at the end of each
payment period.
We would add a definition of the term maximum timeframe, which
would be based entirely on the description of maximum timeframe in
current Sec. 668.16(e)(2)(ii).
Proposed Sec. 668.34(c) and (d) would specify that an
institution's policy may provide for disbursement of title IV, HEA
program funds to a student who has not met an institution's
satisfactory academic standards in certain circumstances.
Proposed Sec. 668.34(c) would permit an institution that measures
satisfactory academic progress at the end of each payment period to
have a policy that would permit a student who is not making
satisfactory academic progress to be placed automatically on financial
aid warning, a newly defined term.
Finally, under proposed Sec. 668.34(d), at an institution that
measures satisfactory academic progress annually, or less frequently
than at the end of each payment period, a student who has been
determined not to be making satisfactory academic progress would be
able to receive title IV, HEA program funds only after filing an appeal
and meeting one of two conditions: (1) The institution has determined
that the student should be able to meet satisfactory progress standards
after the subsequent payment period, or (2) the institution develops an
academic plan with the student that, if followed, will ensure that the
student is able to meet the institution's satisfactory academic
progress standards by a specific point in time.
Reasons: Recent questions from institutions and reviews of
institutional satisfactory academic progress policies have raised
concerns about the effectiveness of institutions' satisfactory academic
policies, even those that comply with the Department's current
regulatory criteria. For example, it has become evident that the use of
automatic probationary periods has resulted in some students receiving
title IV, HEA aid for as long as 24 months even though they are not
meeting the institution's satisfactory academic progress standards.
Moreover, it is also clear that institutions use a variety of terms--
warning, probation, amnesty--to describe situations in which a student
is not making satisfactory academic progress, but nevertheless has been
determined eligible to receive assistance under the title IV, HEA
programs. Repeated uses of these statuses, or use of a combination of
these statuses, applied sequentially, may lead to prolonged periods
during which students who are not making satisfactory academic progress
nevertheless continue to receive title IV, HEA program funds.
The proposed changes to Sec. Sec. 668.16(e), 668.32, and 668.34
are designed to implement a more structured, comprehensive, and
consistent approach to the development and implementation of
institutional satisfactory progress policies.
During the discussions at the negotiated rulemaking sessions, the
Department explained the problems it has identified and solicited
information on current institutional policies and recommendations from
the non-Federal negotiators on ways to amend the current regulations
that would curtail abuses while retaining flexibility for institutions.
The Department used this information in developing the proposed
regulations.
In the following paragraphs, we describe the Department's rationale
for the specific substantive changes proposed to the satisfactory
academic progress regulations.
First we propose to expand the elements required for an
institution's satisfactory academic progress policy to include a
description and specific treatment of transfer credits, a description
of financial aid warning and probationary statuses (if applicable), a
requirement to notify students of the results of a satisfactory
progress review that impacts their eligibility for title IV, HEA
program assistance, specific information required for appeals (if the
institution permits appeals), and if an institution does not permit
appeals, how students may re-establish eligibility for title IV, HEA
program funds. Having a clear understanding of an institution's
satisfactory progress policy will help
[[Page 34822]]
students understand the institution's academic expectations and will
increase the likelihood of their academic success.
We also propose to make changes to the regulatory language
concerning the frequency with which an institution measures the
satisfactory academic progress of its students. During negotiated
rulemaking, several of the non-Federal negotiators stressed the
importance of early intervention in helping students meet their
educational goals. The Department agrees with this approach; however,
because section 484(c) of the HEA requires institutions to evaluate a
student's progress at the end of each academic year or the equivalent,
the Department is limited in its ability to have institutions evaluate
students' progress more frequently (for example, at the end of each
payment period). To encourage institutions to evaluate a student's
academic progress more frequently, the Department proposes regulatory
language that would offer additional flexibility to institutions that
measure satisfactory academic progress at the end of each payment
period. Proposed Sec. 668.34(c) would permit institutions that review
student progress at the end of each payment period to place students on
financial aid warning for one payment period, which would encourage
institutions to provide additional support to students in a timely
manner and would help students be successful.
We would define the term financial aid warning (as well as the term
financial aid probation) in proposed Sec. 668.34(b) to promote
consistent application of these types of designations among
institutions that use these designations in connection with their
satisfactory academic progress reviews. The term financial aid warning
would be defined as a status conferred automatically and without action
by a student, while the term financial aid probation would be defined
as a status conferred after a student has submitted an appeal that has
been granted. The financial aid warning designation would be available
only at an institution that measures satisfactory academic progress at
the end of each payment period. Defining each status would help all
institutions to clearly distinguish when a student may continue to
receive title IV, HEA funds and under what conditions. By defining
these terms to describe the eligibility of the student to receive
future disbursements, we can help ensure that students are treated
consistently and equitably regardless of the institution they attend.
We also would add some regulatory language to ensure that
institutional satisfactory academic progress policies specify the
circumstances under which a student may appeal a determination that the
student is not making satisfactory academic progress and is not
eligible to receive title IV, HEA funds for the subsequent term. The
proposed regulations would not require institutions to permit students
to appeal, but they would specify that students may appeal only under
certain circumstances. Several non-Federal negotiators asserted that
their institutions had established the practice of granting appeals
only to students who could explain how the circumstances that had
caused their academic problems had changed. These negotiators explained
that in their experience, if the root problem was not addressed
successfully, the student was just setting himself or herself up for
failure the next term. These non-Federal negotiators made a compelling
argument for this approach; therefore, we have incorporated it in
proposed Sec. 668.34(c)(8)(ii) (i.e., the student must submit
information regarding why the student failed to make satisfactory
academic progress and what has changed in the student's situation that
will allow the student to demonstrate satisfactory academic progress in
the next evaluation).
There was also discussion during the negotiated rulemaking sessions
regarding what aspect of failure to meet satisfactory academic progress
standards a student could appeal. The non-Federal negotiators generally
agreed that failure to meet both the qualitative and quantitative
standards may be appealed under current regulations, and that this
should be true under the proposed regulations as well. The Department
agrees. There was also discussion about whether failure to meet the
maximum timeframe has been subject to appeal in the past, and whether
it would be permitted under the proposed regulations. Under the current
regulations, a student can appeal his or her failure to complete his
program in the maximum timeframe. The Department believes a student
should continue to be able to appeal a determination that the student
has failed or will fail to meet the maximum timeframe requirements. We
note that the proposed regulations provide flexibility to institutions
to help address the needs of a student who is likely to exceed the
maximum timeframe. An institution could work with the student to
develop an academic plan that would require the student to meet the
institution's graduation requirements by a specific point in time.
Some non-Federal negotiators asked whether the proposed regulations
would permit institutions to have satisfactory academic policies that
provide for academic amnesty. One of the examples given was of an
individual who had an unsuccessful academic career 10 years ago and now
wants to reenroll. The Department's position is that in such a
situation, it would be appropriate for the institution to require the
individual to submit an appeal that explains the change in
circumstances from when the student failed to make satisfactory
academic progress 10 years ago. Under proposed Sec. 668.34(d), an
institution's satisfactory academic progress policy could provide for
such students to submit an appeal and develop an academic plan with the
institution that would specify milestones the student would be expected
to meet. As in other situations where a student has had academic
difficulty and been placed on financial aid probation, the institution
would have the option of placing certain restrictions on the student,
such as limiting the number of hours taken or specifying a certain
sequence of courses.
We propose to require institutions that do not permit students to
appeal a determination that they are not making satisfactory academic
progress to inform students how they may re-establish eligibility. This
regulatory provision would be consistent with the language in section
484(c)(2) of the HEA, which provides that a student who has failed to
maintain satisfactory progress and, subsequent to that failure, has
academic standing consistent with the requirements for graduation, as
determined by the institution, may again be determined eligible for
assistance under title IV, HEA programs.
Throughout the discussions during the negotiated rulemaking
sessions, non-Federal negotiators raised questions about whether the
statutory requirement that an institute review a student's academic
progress at the end of each academic year or its equivalent is tied to
the student's academic year, the award year, the calendar year, or the
institution's defined academic year. It became apparent that most
institutions that review student progress annually, review all students
at a specific point in time, such as at the end of the spring term or
spring payment period. The Department agrees that this is an
appropriate and reasonable institutional policy for an institution that
reviews academic progress annually.
Finally, there was some discussion during the negotiated rulemaking
sessions about whether a student's work completed during a summer term
is subject to evaluation. The Department's position is that any
evaluations of satisfactory academic progress,
[[Page 34823]]
regardless of the frequency with which they are conducted, must include
all work completed by the student since the last review. The Department
welcomes comments as to the clarity of the proposed language in this
regard.
Evaluating the Validity of High School Diplomas (Sec. 668.16(p))
Standards of Administrative Capability (Sec. 668.16(p))
Statute: None.
Current Regulations: The current regulations do not define the term
``high school diploma'' or otherwise include provisions regarding the
evaluation of the validity of a student's high school diploma. While
the term recognized equivalent of a high school diploma is defined in
34 CFR 600.2 (Definitions), the term ``high school diploma'' is not
defined anywhere in the HEA or its implementing regulations. The
current regulations do, however, refer to high school diplomas in the
context of determining institutional eligibility as well as student
eligibility for the title IV, HEA programs.
First, 34 CFR 600.4(a)(2) (Institutions of higher education)
requires an institution of higher education participating in the
Federal student aid programs to admit as regular students only
individuals who have obtained a high school diploma or its recognized
equivalent, or who are beyond the age of compulsory school attendance
in the State in which the institution is located.
In order to be eligible to receive title IV, HEA aid, current Sec.
668.32(e) (Student eligibility) requires a student to have a high
school diploma or its recognized equivalent, have completed secondary
school in a home school setting, or pass an independently administered
examination approved by the Secretary.
Proposed Regulations: Under proposed Sec. 668.16(p), an
institution would be required to develop and follow procedures to
evaluate the validity of a student's high school completion if the
institution or the Secretary has reason to believe that the high school
diploma is not valid or was not obtained from an entity that provides
secondary school education.
Reasons: We propose adding paragraph (p) to Sec. 668.16 to provide
that it is the institution's responsibility to evaluate the validity of
the diploma if either the institution or the Secretary believes that a
closer examination of the diploma is warranted. This proposed change is
designed to ensure that students who report having high school diplomas
and obtain title IV, HEA aid in fact have valid high school diplomas.
The language reflected in this proposed provision is also intended to
address the Government Accountability Office recommendation raised in
its August 17, 2009 report that the Secretary should provide
institutions of higher education with information and guidance on
determining the validity of high school diplomas for use in gaining
access to Federal student aid.
During the negotiated rulemaking sessions, we initially proposed
draft regulatory language that would have required institutions to
evaluate the credentials of secondary schools for purposes of
determining whether high school diplomas issued from the schools were
valid. As part of this evaluation, institutions would have been
required to maintain three listings of secondary schools (schools that
are acceptable, schools that are unacceptable, and schools that require
further evaluation) based on regulatory criteria for determining the
acceptability of their credential for title IV, HEA program purposes.
Many non-Federal negotiators expressed concern over this proposed
draft regulatory language. Several non-Federal negotiators stated that
K-12 issues, including defining high school diploma, should be handled
at the State level. Some non-Federal negotiators also objected to
requiring institutions to research the legitimacy of the high school
diploma a student presents and to maintain lists of secondary schools
based on this research. They argued that these activities would be
unduly burdensome. Instead, many non-Federal negotiators argued that
the Department should assume responsibility for maintaining a
centralized list of secondary schools that institutions could use to
determine whether a student's high school diploma was valid.
Based on concerns raised by the non-Federal negotiators, the
Department agreed to establish and maintain a list of secondary
schools. We believe that such a solution moves us appropriately toward
our goal of uncovering questionable high school diplomas, while
imposing a minimal burden on institutions.
In furtherance of this approach, the Department has begun the
process of adding two questions to the FAFSA for the 2011-2012 award
year:
(1) What is the name of the secondary school or entity that
provided the student's secondary school program of study?
(2) What is the State that awarded the student's high school
diploma?
The Department intends to use the information it collects from
students in response to these questions to help identify whether each
student has a valid high school diploma. If, in response to these
questions on the FAFSA, a student lists a secondary school or entity
that does not match the list of secondary schools maintained by the
Department, or if the student does not provide the name of the
secondary school or entity or the State that issued the diploma, the
Department may select the student's FAFSA for further review by the
institution to determine if the student has a valid high school diploma
before the student can receive any title IV, HEA aid. Therefore, in
cases where the student is selected for review because the Secretary
questions the validity of his or her high school diploma, institutions
are expected to determine the validity of the high school diploma.
Under proposed Sec. 668.16(p), institutions also would be responsible
for determining the validity of a high school diploma if the
institution has reason to believe that the diploma is invalid or was
not obtained from an entity that provides secondary school education.
To determine the validity of a student's high school diploma, an
institution would need to follow the procedures it develops to evaluate
the validity of diplomas. These procedures could include, for example,
obtaining a copy of the student's diploma.
We intend to provide more specific guidance to institutions on
developing and following procedures for evaluating the validity of high
school diplomas through the Federal Student Aid Handbook or through
other means. This guidance will address such issues as what procedures
an institution might use to determine the validity of a high school
diploma.
A non-Federal negotiator expressed concern that the proposed
regulations do not go far enough to address fraud committed at an
institution. This negotiator suggested that the proposed regulations
should be further modified to indicate that officials at an institution
should be aware and held accountable for fraudulent activities
committed at the institution. We did not accept this suggestion because
the Department has other avenues to address fraudulent activities. We
noted that the Department has successfully litigated cases where
institutions are held responsible for regulatory violations of its
employees.
We were able to reach tentative agreement on this issue.
[[Page 34824]]
Return of Title IV, HEA Program Funds (Sec. Sec. 668.22(a), 668.22(b),
and 668.22(f))
Treatment of Title IV, HEA Program Funds When a Student Withdraws From
Term-Based Programs With Modules or Compressed Courses (Sec. 668.22(a)
and (f))
Statute: None.
Current Regulations: In accordance with Sec. 668.22, when a
recipient of title IV, HEA aid withdraws from an institution, the
institution must determine the amount of title IV, HEA aid that the
student earned for the period the student attended. For term-based
programs, a student is paid aid for each term. The regulations address
the institution's and the student's responsibilities when a student
does not finish the term (i.e., withdraws from all courses in the term)
and specifies how to calculate how much aid the student earned for
attending part of the term prior to withdrawing. The regulations do
not, however, specifically address the treatment of term-based
programs, in which courses are less than the length of the term, under
the return of title IV funds calculation. In Dear Colleague Letter GEN-
00-24, published in December 2000, the Department established the
policy that a student who completes only one module or compressed
course, within a term in which he or she is expected to continue
attendance in additional coursework, is not considered to have
withdrawn under the return calculation.
Proposed Regulations: The proposed changes to Sec. 668.22(a)(2)
would clarify when a student is considered to have withdrawn from a
payment period or period of enrollment. In the case of a program that
is measured in credit hours, the student would be considered to have
withdrawn if he or she does not complete all the days in the payment
period or period of enrollment that the student was scheduled to
complete prior to withdrawing. In the case of a program that is
measured in clock hours, the student would be considered to have
withdrawn if he or she does not complete all of the clock hours in the
payment period or period of enrollment that the student was scheduled
to complete prior to withdrawing.
The proposed change to Sec. 668.22(f)(2)(i) would clarify that,
for credit hour programs, in calculating the percentage of the payment
period or period of enrollment completed, it is necessary to take into
account the total number of calendar days that the student was
scheduled to complete prior to withdrawing without regard to any course
completed by the student that is less than the length of the term.
These proposed regulations would affect all programs with courses
that are less than the length of a term, including, for example, a
semester-based program that has a summer nonstandard term with two
consecutive six-week sessions within the term.
Reasons: The Department proposes these changes to ensure more
equitable treatment between students who withdraw from programs that
are measured in credit hours, regardless of whether those programs span
the full length of the term, or are programs with modules or compressed
courses.
Under the guidance provided in Dear Colleague Letter GEN-00-24, we
have equated completing one compressed course or module with completing
one course taken over the span of the term. Under this guidance, a
student who was scheduled to take several modules or compressed courses
in a term but dropped out after completing only one course (for
example, a 5-week course in a 15-week term) was not viewed as having
withdrawn from the term. Accordingly, while we required an institution
to recalculate the student's Federal Pell Grant payment as a result of
any reduction in enrollment status under Sec. 690.80(b)(2)(ii) when
the student did not begin attendance in subsequent classes in the term,
we did not require the school to perform a return calculation under
Sec. 668.22.
Based on this guidance, a student who completed only a one- or two-
week course in a 15-week term and then ceased attendance for the term
would NOT be considered to have withdrawn from the term under the
return of title IV requirements. The institution or student or both
would keep aid intended for a 15-week period of time when the student
only attended the term for as little as one week.
For a number of reasons, we have reconsidered our prior guidance.
First, this change would provide a more equitable treatment of students
who are attending for comparable periods of time during a semester
because a student's aid is based on, and intended to cover, in whole or
in part, not only tuition and fees for the term, but the student's
living expenses for the term. Title IV, HEA aid is provided for the
entire term, and section 484B of the HEA provides that these same
amounts are earned on a prorata basis for the first 60 percent of the
term. Second, a student who only attends one module or compressed
course and then ceases to be enrolled without attending other modules
or compressed courses he or she is scheduled to attend in the term is
withdrawing before completing the term, and the portion of the term
completed should be considered to determine how much of the title IV,
HEA aid the student earned. Third, the prior guidance has resulted in
abusive cases where institutions have created term-based programs with
a very short initial module or course of as little as one week in
length so that institutions can keep all of the title IV, HEA aid for
students who withdraw after that point.
During the negotiations, the non-Federal negotiators raised
concerns about the proposed approach, believing that it would unfairly
penalize students. The negotiators also raised concerns about the
possibility of additional burden from a significant increase in the
number of return to title IV funds calculations that an institution
might have to perform, as well as about the inability of many
institutions to track the number of students who are taking these types
of compressed courses.
The non-Federal negotiators presented three options to address
their concerns by limiting the applicability of the proposed treatment
based upon the relative amounts of the modules that students completed
before withdrawing. The first option was to exclude students who
completed the same enrollment status for which they were originally
paid title IV, HEA aid. The second option suggested by the non-Federal
negotiators was to exclude students who completed 50 percent of the
credits that were awarded and 50 percent of the projected enrollment
time. The third option was to only apply the proposed regulations to
compressed coursework that was shorter than a ``to-be-determined''
percent of the payment period; the non-Federal negotiators did not
reach agreement as to what the appropriate percentage should be.
We appreciate the concerns of the non-Federal negotiators, but we
do not agree with the proposed alternatives. By recognizing that
students who are taking module classes are expected to earn their title
IV, HEA aid over time on a prorata basis, those students are subject to
those requirements up to the point where they complete more than 60
percent of the period. We continue to believe that the proposed changes
are necessary to ensure the equitable application of these provisions
for all students, regardless of the academic calendar of the programs
that students are attending.
Withdrawal Date for a Student Who Withdraws From an Institution That Is
Required To Take Attendance (Sec. 668.22(b))
Statute: Section 484B(c)(1) of the HEA requires institutions and
students to return unearned portions of title IV,
[[Page 34825]]
HEA grant or loan assistance (other than funds received under the
Federal Work-Study Program) when a student withdraws during a payment
period or period of enrollment. The statute defines the term the ``day
the student withdrew'' differently for institutions that are required
to take attendance and for those not required to take attendance. For
an institution that is required to take attendance, the ``day the
student withdrew'' is determined by the institution from its attendance
records. For an institution that is not required to take attendance,
the ``day the student withdrew'' is the date that the institution
determines that (1) the student began the withdrawal process prescribed
by the institution; (2) the student otherwise provided official
notification to the institution of the intent to withdraw; or (3) in
the case of a student who does not begin the withdrawal process or
otherwise notify the institution of the intent to withdraw, the date
that is the midpoint of the payment period for which title IV, HEA
program funds were disbursed or a later date documented by the
institution.
Current regulations: Section 668.22(b)(3) provides the requirements
for determining whether an institution is required to take attendance
for an educational program. Under Sec. 668.22(b)(3), an institution is
required to take attendance if an outside entity (such as the
institution's accrediting agency or a State agency) requires that the
institution take attendance, as determined by the entity. In this case,
the student's withdrawal date is the last date of academic attendance,
as determined by the institution from its attendance records.
Proposed regulations: The proposed revisions to Sec. 668.22(b)(3)
would clarify the programs for which institutions are required to take
attendance. An institution would be required to take attendance if an
outside entity or the institution itself has a requirement that its
instructors take attendance, or if the institution or an outside entity
has a requirement that can only be met by taking attendance or a
comparable process, including, but not limited to, requiring that
students in a program demonstrate attendance in the classes of that
program, or a portion of that program. In addition, the proposed
regulations would remove the provisions in Sec. 668.22(b)(3)(i) and
(ii) that it is the entity that determines whether there is a
requirement to take attendance since the new provision looks at the
substance of the information being collected rather than the
characterization of that information or process by the entity.
Proposed Sec. 668.22(b)(3)(ii) would clarify that if an
institution is required to take attendance by an outside entity or
requires its instructors to take attendance for only some of its
student, then it must use its attendance records to determine a
withdrawal date for those students.
Proposed Sec. 668.22(b)(3)(iii) would incorporate in the
regulations current nonregulatory guidance regarding an institution
that is required to take attendance, or requires that attendance be
taken, for a limited period of time, such as for the first two weeks of
courses or until a ``census date.'' These proposed provisions would
specify that an institution must use its attendance records to
determine a withdrawal date for a student who withdraws during that
limited period. A student in attendance at the end of that limited
period who subsequently stops attending during the payment period would
be treated as a student for whom the institution was not required to
take attendance.
Proposed Sec. 668.22(b)(3)(iv) would also incorporate in the
regulations current nonregulatory guidance that if an institution is
required to take attendance, or requires that attendance be taken, on a
specified date to meet a census reporting requirement, the institution
is not considered to take attendance.
Reasons: These proposed changes would provide a more accurate
determination of how much title IV, HEA aid a student earned who
withdrew from an institution during a period when an instructor or
other institution employee or procedure was required to monitor student
attendance. The non-Federal negotiators had a number of concerns with
respect to our proposals regarding whether an institution is required
to take attendance and regarding the proposed requirement that these
institutions must use their records in determining a student's
withdrawal date in a return to title IV calculation. The non-Federal
negotiators pointed out that having to determine a more exact date of
withdrawal, as opposed to assuming a 50 percent point, would be more
burdensome. They also noted that attendance does not necessarily
accurately reflect academic activity, and also stated that they cannot
ensure that faculty members will keep accurate and up-to-date
attendance records. While we can appreciate these concerns, we continue
to believe that the best date available should be used to determine the
amount of time that a student was in attendance. Using the best date
available would support the fair treatment of students and avoid the
potential for fraud and abuse of Federal funds.
Proposed Sec. 668.22(b)(3)(iii) would address instances where
institutions take attendance for the period of time between the
beginning of classes and the deadline for adding or dropping classes.
Where a student withdraws and an institution's records show that the
student stopped attending during that period, that is the best
information available for determining how much aid the student earned.
This proposed regulation reflects current guidance about whether such
institutions were viewed as being required to take attendance for this
limited period, and this change in the text will help clarify that
requirement. The non-Federal negotiators expressed concern that
students who appear to have stopped attending during a census period
may have subsequently attended other classes before withdrawing.
Institutions have the option under Sec. 668.22(c)(3) to use a
student's participation in an academically related activity to show
that the student continued to be enrolled to a point where the
institution was no longer required to take attendance.
Proposed Sec. 668.22(b)(3)(iv) also would incorporate in the
regulations our current nonregulatory guidance that an institution is
not required to use attendance records for return of title IV, HEA aid
purposes if it is only required to take attendance on a specific date.
We would welcome comments on whether this proposed regulation should be
further clarified to specify that it applies only for one calendar
date, or, for one class that meets during a small range of dates, for
example, for one day for any class that met during a particular week,
rather than ``a specific date.''
Verification and Updating of Student Aid Application Information
(Subpart E of Part 668)
Application Information
Current subpart E of part 668 governs the verification and updating
of the FAFSA information used to calculate an applicant's Expected
Family Contribution (EFC) for purposes of determining an applicant's
need for student financial assistance under title IV of the HEA. In
general, financial need is defined as the difference between the
applicant's cost of attendance (COA) and EFC (see section 471 of the
HEA). Based on the need analysis formula established in part F of the
HEA, the EFC is the amount that an applicant and the applicant's family
can reasonably be expected to contribute toward the
[[Page 34826]]
applicant's cost of attendance at an institution of higher education.
These proposed regulations would implement statutory changes made
to part F of the HEA by the HEOA and further align these regulations
with enhancements that have been made to the Federal Student Aid (FSA)
application processing system. In the following paragraphs we describe
the substantive changes we propose to make to subpart E of part 668 and
the reasons for the changes. These proposed changes include--
Revising the subpart E heading to reflect that an
applicant and an institution have updating responsibilities in addition
to completing specific verification responsibilities;
Removing, redefining, and adding definitions;
Codifying current policy that an institution must complete
verification before exercising any authority under professional
judgment;
Removing the 30 percent cap on the number of applicants
selected by the Secretary that an institution must verify in order to
move towards a more targeted verification system;
Restructuring the exclusions from verification section;
Requiring any changes to a student's dependency status be
updated throughout the award year, including changes resulting from a
change in the student's marital status;
Updating the section heading under Sec. 668.56 and
replacing the five items that an institution currently is required to
verify for all applicants selected for verification with a targeted
verification process that is specific to each applicant selected as
described in a Federal Register notice published annually by the
Secretary;
Codifying the Department's Internal Revenue Service (IRS)
Data Retrieval Process, which allows an applicant to import income and
other data from the IRS into an online FAFSA;
Updating the IRS deadline granted for extension filers;
Clarifying when an institution is required to reverify the
adjusted gross income (AGI) and taxes paid by an applicant and his or
her spouse or parents for individuals with an IRS tax filing extension;
Expanding the information a tax preparer must provide on
the copy of the filer's return that has been signed by the preparer;
Describing in an annual Federal Register notice other
documentation that an applicant must provide for the information that
is selected for verification;
Allowing interim disbursements when changes to an
applicant's FAFSA information would not change the amount the applicant
would receive under title IV, HEA;
Requiring all corrections to be submitted to the Secretary
for reprocessing;
Removing all allowable tolerances;
Applying the cash management procedures for proceeds
received from a Subsidized Stafford Loan or Direct Subsidized Loan on
behalf of an applicant; and
Describing the liability to an institution that disburses
title IV, HEA aid to an applicant without receiving a corrected Student
Aid Report (SAR) or Institutional Student Information Record (ISIR)
within an established deadline.
Tentative agreement was reached on these proposed regulations
during the negotiated rulemaking.
General (Sec. 668.51)
Statute: Section 487(a)(5) of the HEA provides that an institution
may participate in a title IV, HEA program if the institution enters
into a written program participation agreement with the Secretary. A
program participation agreement conditions the initial and continued
participation of an eligible institution in any title IV, HEA program
upon compliance with the provisions of part 668, the individual program
regulations, and any additional conditions specified in the program
participation agreement that the Secretary requires the institution to
meet.
Current Regulations: Current Sec. 668.51(a) describes the scope
and purpose of subpart E of part 668. Current Sec. 668.51(b) requires
that if the Secretary or an institution requests documents or
information from an applicant under this subpart, the applicant must
provide the specified documents or information. Under current Sec.
668.51(c), institutions participating in the Federal Stafford Loan
Program that are not located in a State are exempted from the
provisions of subpart E of part 668.
Proposed Regulations: Proposed Sec. 668.51 would remain largely
unchanged from current Sec. 668.51. We propose to revise Sec.
668.51(a) to refer to ``student financial assistance under the
subsidized student financial assistance programs'' rather than to
``student financial assistance in connection with the calculation of
their expected family contributions (EFC) for the Federal Pell Grant,
ACG, National SMART Grant, campus-based, Federal Stafford Loan, Federal
Direct Stafford/Ford Loan programs.'' In addition, in paragraph (c) of
proposed Sec. 668.51, we would refer to ``participating institutions''
rather than ``institutions participating in the Federal Stafford Loan
Program.''
Reasons: Throughout the proposed regulations, including in this
proposed Sec. 668.51, we propose to remove all the program names and
regulatory citations for the ACG and National SMART Grant programs
because the authority to make grants under these programs will expire
at the end of the 2010-2011 award year, before these proposed
regulations become effective. In making this change, we also determined
that it would be appropriate to refer to the title IV, HEA programs
affected by this subpart more generally as ``subsidized student
financial assistance programs'' and ``unsubsidized student financial
assistance programs,'' as appropriate. We would define these terms in
proposed Sec. 668.52.
Definitions (Sec. 668.52)
Statute: In 2008, the HEOA amended the definition of the term total
income in section 480(a) of the HEA to provide that, when calculating
total income, the Secretary may use income and other data from the
second preceding tax year to carry out the FAFSA simplification efforts
used for the estimation and determination of financial aid eligibility.
This provision also allows the sharing of data between the IRS and the
Secretary with the consent of the taxpayer as discussed later under
proposed Sec. 668.57.
Current Regulations: Current Sec. 668.52 includes definitions of
key terms used in this subpart including base year, edits,
institutional student information record, and student aid application.
Proposed Regulations: Proposed Sec. 668.52 would (1) remove the
definitions of base year, edits, and student aid application; (2)
revise the definition for institutional student information record
(ISIR); and (3) add definitions for the terms Free Application for
Federal Student Aid (FAFSA), specified year, Student Aid Report (SAR),
subsidized student financial assistance programs, and unsubsidized
student financial assistance programs.
Reasons: We propose to delete the definitions of the terms base
year, edits, and student aid application because these terms would no
longer be used in these proposed regulations.
We propose to define the term Free Application for Federal Student
Aid (FAFSA) and to use this term ``FAFSA information''--rather than
application--throughout subpart E of part 668 in order to clarify that
the information we
[[Page 34827]]
seek to verify includes not only the information provided in the
initial FAFSA form submitted by an applicant, but also any subsequent
transactions sent to the Secretary for processing that originated from
the information reported on the initial FAFSA (i.e., corrections).
We propose to revise the definition of the term institutional
student information record (ISIR) to make it consistent with the
definition of ISIR in 34 CFR 690.2(c) of the Federal Pell Grant Program
regulations. By establishing this definition in this subpart, we would
make the term generally applicable to all title IV, HEA programs that
are subject to the requirements in subpart E of part 668.
We propose to define the term specified year to assist in the
implementation of section 480(a) of the HEA, which gives the Secretary
the option of using income and other data from the second preceding tax
year to calculate the statutorily defined EFC that determines the
applicant's eligibility for, and amount of, Federal aid. While the
Department does not plan to exercise this option for the 2011-2012
award year, we believe it is appropriate to modify the regulations at
this time to allow for this flexibility in the future.
Under the current process for completing the FAFSA, an applicant,
the parents of a dependent applicant, or the spouse of an applicant are
required to use base year income and tax information to respond to
questions used to calculate the statutorily defined EFC that determines
the applicant's eligibility for, and amount of, Federal aid i.e.,
grants, loans and work-study assistance. Under the new flexibility
offered to the Secretary in section 480(a) of the HEA, applicants could
use income and other data from the second preceding tax year--rather
than only the base year. For example, an applicant completing the FAFSA
for the 2013-2014 award year could use income and other related data
pertaining to January 1, 2011-December 31, 2011 (the second preceding
tax year) in addition to the data the Secretary currently collects from
the base year (January 1, 2012-December 31, 2012).
Allowing the use of data from an earlier tax year would help with
the significant calendar difference between when an applicant may file
a FAFSA and when the data is available from the filed income tax
return. This is because the FAFSA application process begins on January
1, and it is unlikely that tax return information would be available
for the majority of financial aid applicants who complete their FAFSA
in the weeks, and in some cases months, before the general tax-filing
deadline of April 15. The proposed definition of specified year would
allow the Department to use a single term that, depending on the
context in which it is used, means (1) the base year (i.e., the
calendar year preceding the first calendar year of an award year) or
(2) the year before the base year.
We propose to add a definition of the term Student Aid Report (SAR)
and simplify the repeated references to it in these proposed
regulations.
We propose to add definitions for the terms subsidized student
financial assistance programs and unsubsidized student financial
assistance programs to group similar title IV, HEA programs together
(i.e., subsidized programs versus unsubsidized programs). By doing so,
we would simplify the repeated references to the numerous affected
programs in these proposed regulations.
Policies and Procedures--Professional Judgment (Sec. 668.53(c))
Statute: Section 479A of the HEA specifically gives the financial
aid administrator the authority to use professional judgment to make
adjustments to the cost of attendance or to the values of the items
used in calculating the EFC to reflect a student's special
circumstances.
Current Regulations: Current Sec. 668.53 requires institutions to
establish and use written policies and procedures for verifying
information contained in the FAFSA. Current Sec. 668.53(a)(1) through
(5) describes the items that must be included in the policies and
procedures. Current Sec. 668.53(b) requires that an institution's
procedures provide that the institution furnish to each application
selected for verification an explanation of the documentation needed to
satisfy the verification requirements and the applicant's
responsibilities with respect to the verification of applicant
information.
Proposed Regulations: Except for minor technical and conforming
changes, proposed Sec. 668.53(a) and (b) would remain largely
unchanged from current Sec. 668.53(a) and (b). We propose to add
paragraph (c) to this section. Under proposed Sec. 668.53(c), an
institution's written policies and procedures for verifying information
contained in a FAFSA must provide that verification for an application
selected for verification is completed prior to the institution
exercising professional judgment authority as permitted under section
479A of the HEA to make changes to the applicant's COA or to the value
of the data items used to calculate the EFC.
Reasons: Proposed Sec. 668.53(c) would codify as a requirement the
Department's longstanding policy that an institution must complete
verification before exercising professional judgment under section 479A
of the HEA.
Selection of FAFSA Information for Verification (Sec. 668.54)
Statute: None.
Current Regulations: Current Sec. 668.54(a) provides that an
institution is not required to verify the information from more than 30
percent of its applicants for title IV, HEA assistance in any award
year. Under current Sec. 668.54(a)(2)(ii), an institution may only
include those applicants selected for verification by the Secretary in
its calculation of the 30 percent total number of applicants. Under
current Sec. 668.54(a)(3), if an institution has reason to believe
that any information on an application used to calculate an EFC is
inaccurate, it must require the applicant to verify the information
that it has reason to believe is inaccurate.
Except for information already verified under a previous
application, if an applicant is selected for verification, each
additional application he or she submits for the award year must also
be verified (see current Sec. 668.54(a)(4)).
Current Sec. 668.54(a)(5) provides that an institution or the
Secretary may require an applicant to verify any data elements that the
institution or the Secretary specifies.
Under current Sec. 668.54(b)(1), the Secretary excludes an
applicant who dies during the award year from verification.
In addition, under current Sec. 668.54(b)(2), the Secretary
excludes the following categories of applicants from verification if
the institution has no reason to believe that the information reported
by the applicant is incorrect:
An applicant or his or her parents who are legal residents
of the Commonwealth of the Northern Mariana Islands, Guam, or American
Samoa; or a citizen of the Republic of the Marshall Islands, the
Federated States of Micronesia, or the Republic of Palau (current Sec.
668.54(b)(2)(i)).
An applicant who is incarcerated (current Sec.
668.54(b)(2)(ii)).
A dependent applicant whose parents are residing in a
country other than the United States and cannot be contacted by normal
means of communication (current Sec. 668.54(b)(2)(iii)).
An applicant who is a recent immigrant (current Sec.
668.54(b)(2)(iv)).
[[Page 34828]]
An applicant whose parents' address is unknown and cannot
be obtained by the applicant (current Sec. 668.54(b)(2)(v)).
A dependent applicant, both of whose parents are deceased
or are physically or mentally incapacitated (current Sec.
668.54(b)(2)(vi)).
An applicant who does not receive assistance for reasons
other than his or her failure to verify the information on the
application (current Sec. 668.54(b)(2)(vii)).
An applicant who previously completed verification at
another institution (current Sec. 668.54(b)(2)(viii)).
Finally, under current Sec. 668.54(b)(3), the Secretary excludes
the following categories of applicants from verification:
An applicant whose spouse is deceased (current Sec.
668.54(b)(3)(i)).
An applicant whose spouse is mentally or physically
incapacitated (current Sec. 668.54(b)(3)(ii)).
An applicant whose spouse is residing in a country other
than the United States and cannot be contacted by normal means of
communication (current Sec. 668.54(b)(3)(iii)).
An applicant whose spouse cannot be located because his or
her address is unknown and cannot be obtained by the applicant (current
Sec. 668.54(b)(3)(iv)).
Proposed Regulations: The Department proposes to require an
institution to verify an applicant's FAFSA information for all
applicants that are selected for verification by the Secretary (see
proposed Sec. 668.54(a)). Under proposed Sec. 668.56(a), the
Secretary would publish an annual Federal Register notice that would
describe the information that an institution and an applicant may be
required to verify for those applicants selected for verification. In
proposed Sec. 668.54(a)(2), we would retain the provisions requiring
an institution to verify the accuracy of FAFSA information it has
reason to believe is inaccurate. In proposed Sec. 668.54(a)(3), we
would continue to provide institutions with the flexibility to verify
any FAFSA information that an institution specifies.
Under Sec. 668.54(b), we would restructure the exclusions from
verification to make clear the provisions that are applicable to all
applicants, and those that are specific to dependent or independent
applicants. We also would remove the following categories of applicants
from the list of verification exclusions:
An applicant or his or her parents who are legal residents
of the Commonwealth of the Northern Mariana Islands, Guam, or American
Samoa; or a citizen of the Republic of the Marshall Islands, the
Federated States of Micronesia, or the Republic of Palau.
An applicant who is incarcerated.
An applicant who is a recent immigrant.
A dependent applicant, both of whose parents are deceased
or are physically incapacitated.
An independent applicant's spouse who is physically
incapacitated.
Proposed Sec. 668.54(b)(2) and (b)(3) would list the circumstances
under which the parents' or spouse's information is not subject to
verification unless the institution has reason to believe the parents'
or spouse's information reported by the applicant is incorrect.
Reasons: The proposed changes to Sec. 668.54 are needed to align
this section of the regulations with modifications that the Department
proposes to make to the verification selection process. Specifically,
the Department proposes to remove the 30 percent limitation of the
total number of applicants selected for verification and target the
selection criteria based on the most error prone data items that are
specific to each applicant selected.
Based on years of data analysis compiled from random samples of
FAFSA submissions and the IRS Statistical Study and Quality Assurance
Program analysis, we have made improvements to the verification process
that will better identify and select those applicants whose FAFSA
information is most error prone. For this reason, we propose to remove
the 30 percent limitation on the number of applicants an institution is
required to verify.
During negotiated rulemaking, some non-Federal negotiators
expressed concern that the removal of the 30 percent limitation on the
number of applicants an institution is required to verify would
significantly increase an institution's workload. Other non-Federal
negotiators stated that many institutions currently verify 100 percent
of those applicants the Department selects for verification.
Although some institutions may experience an increase in the number
of applicants that are selected for verification under the new process,
institutions would no longer be required to verify all five items for
each applicant selected. Instead the information that an institution
would be required to verify would be specific to each applicant
selected (see proposed Sec. 668.56(b)). For example, one applicant may
be required to verify the five items required under the current
regulations (because the Secretary includes them in the Federal
Register notice published under Sec. 668.56(a) and specifies that
those items must be verified for that one applicant) while another
applicant may only be required to verify AGI and household size
(because the Secretary includes these two items in the Federal Register
notice published under Sec. 668.56(a) and specifies that these are the
only items that must be verified for this applicant).
Moreover, we expect information obtained through the IRS Data
Retrieval process to significantly reduce institutional burden as
discussed later under proposed Sec. 668.57. For example, if one of the
items selected for verification for an applicant includes data that the
applicant imported from the IRS, we likely would not require the
institution to verify that item.
We are proposing to restructure paragraph (b) to clarify under what
circumstances an institution is not required to verify the FAFSA
information of: (1) the applicant; (2) the parents of a dependent
applicant; or (3) the spouse of an independent applicant. In instances
where FAFSA information from the parents or a spouse is not required,
we would still expect an institution to verify any information that
would be applicable to the applicant.
We are also proposing to modify a number of exclusions that are
included in the current regulations. Previously, if the parent of a
dependent student, or the spouse of an independent student, could not
be located because their address was unknown, verification was not
required. Given the shift to routinely contacting people using e-mail
and cell phone numbers, lack of a physical mailing address no longer
precludes contact and communication. We believe it would be more
appropriate to provide an exclusion from verification only in
circumstances where the parents or spouse cannot be located because
their contact information is unknown. We are also proposing to
eliminate the provision that a dependent student need not provide
parental information if both parents are deceased or are physically
incapacitated. If both parents are deceased, the student would be an
independent student, not a dependent student. Parents who are
physically incapacitated, but not mentally incapacitated, should be
able to provide the documentation required for verification under most
circumstances.
Updating Information--Changes in Dependency Status (Sec. 668.55(c))
Statute: None.
Current Regulations: Current Sec. 668.55 describes the information
in an application that applicants must update
[[Page 34829]]
when there is a change and when and how these changes must be made.
Under current Sec. 668.55(a)(2), an institution need not require
an applicant to verify information in the applicant's FAFSA if the
applicant previously submitted a FAFSA for that award year, the
applicant updated the FAFSA information, and no change in the
information has taken place since the last update.
Current Sec. 668.55(a)(3) requires applicants to update their
dependency status on the FAFSA at any time the status changes
throughout the award year, except when the change in dependency status
results from a change in the student's marital status.
Under current Sec. 668.55(b), updating the family household size
and number of family members enrolled in college is required for
students selected for verification and is updated as of the time
verification is completed.
Current Sec. 668.55(c) describes an institution's responsibilities
when an applicant has received Federal financial assistance for an
award year, the applicant submits another application for Federal
financial assistance, and the applicant is required to update household
size or the number of household family members attending postsecondary
educational institutions on the subsequent application.
Current Sec. 668.55(d) provides that if an applicant's dependency
status changes after the applicant applies to have his or her EFC
calculated for an award year, the applicant must file a new application
for that award year reflecting the applicant's new dependency status
regardless of whether the applicant is selected for verification.
Proposed Regulations: We propose to revise Sec. 668.55 to require
an applicant to update all changes in dependency status that occur
throughout the award year, including changes resulting from a change in
the applicant's marital status, regardless of whether the applicant is
selected for verification. With this proposed change, which would be
reflected in proposed paragraph (c) of Sec. 668.55, we would make a
number of other changes to this section to remove language that
implements the marital status exception in the current regulations,
including removing current Sec. 668.55(a)(3) and revising Sec.
668.55(b).
We would remove current Sec. 668.55(c).
Reasons: We propose to simplify Sec. 668.55 and to make the
updating requirement for dependency status consistent with the other
changes we propose to make to Sec. 668.58(a)(3)(i) and Sec.
668.59(a). We believe these changes would help ensure that the amount
of assistance received by an applicant is based on the best available
information.
During negotiated rulemaking, there was much discussion about
identifying in the regulations a specific time by which an institution
would need to require an applicant to update his or her family
household size, number of family members enrolled in college, and
dependency status in the applicant's FAFSA. Non-Federal negotiators
wanted the updating requirements to be date specific because of
concerns that institutions would be continually revising an applicant's
aid package throughout the award year. To address these concerns, we
considered a number of alternatives:
Allow updating up to the beginning of the award year
(i.e., July 1, 2011 for the 2011-2012 award year). We have not adopted
this alternative in the proposed regulations because this date would
not take into account those applicants who apply later in the
processing year.
Require updating by the later of July 1 or the date of
verification, after which updating would become optional. We have not
adopted this alternative in the proposed regulations because it would
not allow a student who transfers to an institution after this deadline
to update his or her application information to reflect his or her
current status unless the institution selects the student for
verification.
Allow updating until the end of the first payment period.
We have not adopted this alternative in the proposed regulations
because it would result in inconsistent treatment between students at
institutions that have open enrollment with multiple start dates and
students at institutions whose enrollment is based on a traditional
calendar.
Other time periods considered included allowing updating half way
through the award year, throughout the award year, up to the first day
of an applicant's enrollment at an institution, through an
institution's academic year, or by the end of the calendar year similar
to the precedent set by the IRS for changes to income tax data. After
considerable discussion, we determined that no single date would be
ideal for all situations.
Therefore, we propose no substantive change to the current
requirement, reflected in Sec. 668.55(b), that if an applicant is
selected for verification, the applicant must update information as to
the family household size and the number of family members enrolled in
postsecondary institutions at the time of verification.
We propose to eliminate the marital status exception and to require
all applicants to update changes to dependency status that occur
throughout the award year regardless of whether the applicant was
selected for verification to provide more accurate information for
determining an applicant's need for assistance. It is important to note
that the applicant is responsible for notifying an institution when
there is a change that affects his or her dependency status and not the
responsibility of the institution to initiate the updating of this data
item. However, an institution must resolve discrepancies in the
information that the institution receives from different sources with
respect to a student's application for financial aid under the title
IV, HEA programs in accordance with Sec. 668.16(f).
Finally, we propose to delete current Sec. 668.55(c) to remove an
obsolete process that required applicants to complete a correction
application if his or her dependency status changes.
Information To Be Verified (Sec. 668.56)
Statute: None.
Current Regulations: Under current Sec. 668.56 an institution must
require an applicant selected for verification to submit acceptable
documentation to verify or update the following items, if applicable,
used to determine the applicant's EFC:
Adjusted gross income (AGI);
U.S. income tax paid;
Number of family members in the household;
Number of family members in the household enrolled at
least half-time in postsecondary educational institutions; and
Untaxed income and benefits.
Current Sec. 668.56(b) through (e) provides a number of exclusions
from verification of the number of family members in the household, the
number of family members enrolled in college and untaxed income and
benefits under certain circumstances.
Proposed Regulations: The Department proposes to amend the section
heading for Sec. 668.56 by replacing the term ``Items'' with the term
``Information''.
We also propose to eliminate from the regulations the five items
that an institution currently is required to verify for all applicants
selected for verification. Instead, pursuant to proposed Sec.
668.56(a), for each award year, the Secretary would specify in a
Federal Register notice the FAFSA information and documentation that an
institution and an applicant may be required to verify. The Department
would then specify on an individual student's SAR and ISIR what
[[Page 34830]]
information must be verified for that applicant.
We would also remove current Sec. 668.56(c) through (e).
Reasons: Due to several statutory changes that remove untaxed
income and benefits items from the FAFSA and need analysis formula and
with the importing of data as part of the IRS Data Retrieval process,
we believe it is no longer necessary to require all selected applicants
to verify AGI, U.S. taxes paid, the number of family members in the
household size, number of family members enrolled in college, and
untaxed income and benefits. Therefore, in Sec. 668.56, we propose to
remove the list of items to be verified as well as the exclusions from
verification contained in current Sec. 668.56(b) through (e). Instead,
we propose to target verification based on the most error prone data
items that are specific to each applicant selected.
During negotiated rulemaking, the non-Federal negotiators supported
this targeted approach of selecting specific items for verification. In
particular, they stated that including dependency status as a
verifiable item would help alleviate the difficulties institutions
experience with inappropriate designations of dependency status.
In implementing this proposed section, we expect that the Federal
Register notice may, at least initially, include the five items
included for verification under current Sec. 668.56 as well as other
items the Department deems necessary to ensure the accuracy of the data
being reported. With this approach, not all applicants selected for
verification would have to verify all the information identified in the
notice. For each applicant, the Department would identify on an
applicant's SAR or ISIR the specific FAFSA information that requires
further review applicable to that applicant.
We intend to publish the Federal Register notice described in
proposed Sec. 668.56 as early as possible to give institutions
sufficient time to make any system changes that may be necessary to
verify the information the Secretary may require under the notice.
(Note that the notice referred to under proposed Sec. 668.56 is not
the same notice referred to under proposed Sec. 668.60(c)(1).)
Acceptable Documentation (Sec. 668.57(a)(2), (a)(4)(ii)(A), (a)(5),
(a)(7), and (d))
Statute: Section 484(q) of the HEA gives the Secretary authority,
in cooperation with the Secretary of Treasury, to obtain from the IRS
the AGI, Federal income taxes paid, filing status, and exemptions
reported on the Federal income tax return by an applicant, or any other
individual whose financial information is required on the FAFSA. Under
this provision of the HEA, as a condition of a student receiving title
IV, HEA assistance, the Secretary may require an applicant, the parents
of a dependent applicant, or the spouse of an applicant to provide
consent in order for the IRS to disclose the necessary information.
Current Regulations: Current Sec. 668.57 specifies the
documentation an institution must obtain from an applicant to verify an
applicant's household size, number of family members enrolled in
college, AGI, U.S. income tax paid, and certain untaxed income and
benefits.
Current Sec. 668.57(a) describes the documentation that an
institution must require an applicant selected for verification to
provide to verify the AGI, income earned from work, and U.S. income tax
paid listed on the applicant's FAFSA.
Under current Sec. 668.57(a)(2), if the applicant selected for
verification does not have a copy of his or her tax return, an
institution may require an applicant to submit a copy of an IRS form
which lists tax account information.
As alternate documentation to verify an applicant's AGI, income
earned from work or taxes paid, the applicant may provide the
institution with a copy of IRS Form 4868 that was filed with the IRS
for the base year requesting an extension to file income tax return, or
a copy of the extension beyond the automatic four-month extension
granted to the applicant by the IRS (see current Sec.
668.57(a)(4)(ii)(A)). Once the return is filed, the applicant must
provide the institution with a copy of the tax return pursuant to
current Sec. 668.57(a)(5). When the institution receives a copy of the
tax return that was filed, the institution could, but is not required
to, re-verify the applicant's AGI and taxes paid. Under current Sec.
668.60, if the tax return was not collected, the institution and the
student are liable for any funds disbursed.
Under current Sec. 668.57(a)(7), an institution may accept the tax
preparer's signature or stamp instead of the filer's signature on the
tax return.
Current Sec. 668.57(b) describes the documentation that an
institution must require an applicant selected for verification to
provide to verify the number of family household members that is listed
on the applicant's FAFSA.
Current Sec. 668.57(c) describes the documentation that an
institution must require an applicant selected for verification to
provide to verify the number of family household members enrolled in
postsecondary institutions that is listed on the applicant's FAFSA.
Current Sec. 668.57(d) describes the documentation that an
institution must require an applicant selected for verification to
provide to verify any untaxed income and benefits listed on the
applicant's FAFSA.
Proposed Regulations: We propose to make a number of technical and
conforming changes throughout Sec. 668.57. We also propose to make the
following substantive changes:
Proposed Sec. 668.57(a)(2) would allow an institution to accept,
in lieu of an income tax return or an IRS form that lists tax account
information, the electronic importation of data obtained from the IRS
into an applicant's online FAFSA.
We also propose to amend Sec. 668.57(a)(4)(ii)(A) to accurately
reflect that, upon application, the IRS grants a six-month extension
beyond the April 15 deadline rather than the four-month extension
currently stated in the regulations.
Under proposed Sec. 668.57(a)(5), an institution may require an
applicant who has been granted an extension to file his or her income
tax return to provide a copy of that tax return once it has been filed.
If the institution requires the applicant to submit the tax return, it
must reverify the AGI and taxes paid of the applicant and his or her
spouse or parents when the institution receives the return.
Proposed Sec. 668.57(a)(7) would clarify that an applicant's
income tax return that is signed by the preparer or stamped with the
preparer's name and address must also include the preparer's Social
Security Number, Employer Identification Number or the Preparer Tax
Identification Number.
Proposed Sec. 668.57(b) and (c) would remain substantively
unchanged.
We would delete current Sec. 668.57(d) regarding acceptable
documentation for untaxed income and benefits and replace it with new
proposed Sec. 668.57(d). This new section would provide that if an
applicant is selected to verify other information specified in an
annual Federal Register notice, the applicant must provide the
documentation specified for that information in the Federal Register
notice.
Reasons: Generally, our proposed changes to Sec. 668.57 are
intended to implement section 484(q) of the HEA, update and clarify the
language to ensure that it accurately reflects the IRS documentation
and processes to which it refers and is consistent with the other
changes we propose to make to subpart E of part 668.
[[Page 34831]]
Our goal with the implementation of the IRS Data Retrieval Process
in proposed Sec. 668.57(a)(2) is to relieve burden on institutions by
no longer requiring verification of the information that is imported
from the IRS to populate a student's online FAFSA or requiring
institutions to collect the documentation for those items. For
instance, an institution would no longer be required to verify an
applicant's and his or her family's AGI and taxes paid or collect
income tax returns for students who import that data from the IRS.
Under current Sec. 668.57(a)(5), an institution that requires an
applicant who was granted an extension to file his or her income tax
return to submit to the institution his or her completed return once it
was filed, has the option of re-verifying the AGI and taxes paid by the
applicant and his or her spouse or parents when the institution
receives the copy of the return. Under these proposed regulations, if
an institution requires an applicant that is granted an extension to
file his or her income tax return to submit a copy of the return that
was filed, the institution must act on the return received by re-
verifying the AGI and taxes paid by the applicant and his or her spouse
or parents.
During the negotiated rulemaking sessions, we initially proposed
removing current Sec. 668.57(a)(7), which allows a tax preparer to
sign an applicant's income tax return. Some non-Federal negotiators
indicated that administrative burden would be reduced if an institution
could continue to accept a tax preparer's signature or stamp in lieu of
the filer's signature on the tax return. Based on concerns raised by
the non-Federal negotiators, we agreed to retain this provision in the
proposed regulations, but to clarify that an applicant's income tax
return must include the preparer's Social Security Number, Employer
Identification Number or the Preparer Tax Identification Number in
addition to his or her signature or a stamp of the preparer's name and
address.
Except for minor technical and conforming changes, proposed Sec.
668.57(b) and (c) would remain largely unchanged from current Sec.
668.57(b) and (c).
We would delete current Sec. 668.57(d) regarding acceptable
documentation for untaxed income and benefits because several statutory
changes would eliminate any consideration of untaxed income and
benefits from the need analysis formula to determine an applicant's
eligibility for assistance under the title IV, HEA programs. Instead,
we would require an applicant selected to verify other information
specified in an annual Federal Register notice to provide the
documentation identified as acceptable in the Federal Register notice.
We propose to add this paragraph to allow the Secretary the flexibility
to identify in an annual Federal Register notice other documentation
that can be used to verify FAFSA information.
Interim Disbursements (Sec. 668.58(a)(3))
Statute: None.
Current Regulations: Current Sec. 668.58 sets out the conditions
under which an institution may, but is not required to, disburse title
IV, HEA program funds to an applicant before the applicant completes
verification.
Under current Sec. 668.58(a)(2)(ii)(A), if an institution does not
have reason to believe that an applicant's FAFSA information is
inaccurate, it may choose to disburse only one disbursement of title
IV, HEA program funds to the applicant before he or she completes
verification.
Proposed Regulations: Proposed Sec. 668.58 would largely reflect
the substance of current Sec. 668.58 except that we would make a
number of technical and conforming changes throughout the section and
we would add a new paragraph (a)(3). Under proposed Sec. 668.58(a)(3),
an institution would be allowed to disburse title IV, HEA program funds
after verification is completed but before receiving the corrected SAR
or ISIR if the changes to an applicant's FAFSA information would not
change the amount the applicant would receive under a title IV, HEA
program. If an institution chooses to make a disbursement before
receiving the corrected SAR or ISIR, it must ensure that all
corrections are submitted to the Department to avoid any liability for
a disbursement made without receiving a corrected SAR or ISIR within
the established deadline as discussed under proposed Sec. 668.61(c).
Reasons: During the negotiated rulemaking sessions, some non-
Federal negotiators expressed concern that applicants would be harmed
if their disbursements were delayed until the institution received a
corrected SAR or ISIR. To address these concerns, we propose to add
paragraph (a)(3) to Sec. 668.58. This new provision would permit
institutions to make interim disbursements of title IV, HEA program
funds prior to receiving an applicant's corrected SAR or ISIR within
the established deadline date. By adding this provision, we would
increase institutional flexibility in disbursing title IV, HEA program
funds.
Consequences of a Change in an Applicant's FAFSA Information (Sec.
668.59)
Statute: None.
Current Regulations: For the Federal Pell Grant, Academic
Competitiveness Grant (ACG) and National Science and Mathematics Access
to Retain Talent Grant (National SMART Grant) programs, if the
information on an application changes as a result of verification, the
institution must require the applicant to resubmit his or her
application information to the Department for corrections (see current
Sec. 668.59(a)(1)).
Under current Sec. 668.59(a)(2), an institution is not required to
make an applicant resubmit his or her application information if the
errors are nondollar items used to calculate the applicant's EFC or the
errors in the dollar amount are within a $400 tolerance.
Current Sec. 668.59(b) provides that if an institution does not
recalculate an applicant's EFC under the provisions of Sec. 668.59(a),
the institution must disburse the applicant's Federal Pell Grant, ACG,
or National SMART Grant award based on the applicant's original EFC.
If an institution recalculates an applicant's EFC because of a
change in application information resulting from verification, the
institution must require the applicant to resubmit his or her
application to the Secretary; recalculate the applicant's Federal Pell
Grant, ACG, and National SMART Grant award based on the EFC on the
corrected SAR or ISIR and disburse any additional funds, if additional
funds are payable, once the applicant provides the institution with the
corrected SAR or ISIR.
If an institution determines, after verification, that the change
in application information increases the applicant's award, the
institution may disburse the applicant's Federal Pell Grant, ACG, and
National SMART Grant based on the original EFC without requiring the
applicant to resubmit his or her application information and disburse
any additional funds under the increased award reflecting the new EFC
if the institution receives the corrected SAR or ISIR, except as
provided under current Sec. 668.60(b).
For the campus-based, Federal Stafford Loan and Federal Direct
Stafford Loan programs, if the information on an application changes as
a result of verification, the institution must recalculate the
applicant's EFC, and adjust the applicant's financial aid package to
reflect the new EFC if the
[[Page 34832]]
new EFC results in an over award of campus-based funds or decreases the
applicant's recommended loan amount (see current Sec. 668.59(c)(1)).
Under current Sec. 668.59(c)(2), an institution is not required to
recalculate an applicant's EFC or adjust his or her aid package if the
errors are nondollar items used to calculate the applicant's EFC; or
the errors in the dollar amount is within a $400 tolerance.
Under current Sec. 668.59(d), if the institution selects an
applicant for verification for an award year who previously received a
Subsidized Stafford Loan or Direct Subsidized Loan for that award year,
and as a result of verification the loan amount is reduced, the
institution must eliminate the amount in excess of the student's need
by returning funds to the lender or by reducing or cancelling
subsequent disbursements.
An institution must forward the applicant's name, social security
number, and other relevant information to the Department if the
applicant received funds based on information that may be incorrect and
the institution has made a reasonable effort to resolve the alleged
discrepancy (see current Sec. 668.59(e)).
Proposed Regulations: We propose to revise Sec. 668.59 by removing
all allowable tolerances and requiring instead that an institution
submit to the Department all changes to an applicant's FAFSA
information resulting from verification for those applicants receiving
assistance under any of the subsidized student financial assistance
programs (see proposed Sec. 668.59(a)).
Under proposed Sec. 668.59(b), for the Federal Pell Grant program,
once the applicant provides the institution with the corrected SAR or
ISIR, the institution would be required to recalculate the applicant's
Federal Pell Grant and disburse any additional funds, if additional
funds are payable. If the applicant's Federal Pell Grant would be
reduced as a result of verification, the institution would be required
to eliminate any overpayment by adjusting subsequent disbursements or
reimbursing the program account by requiring the applicant to return
the overpayment or making restitution from its own funds (see proposed
Sec. 668.59(b)(2)(ii)).
Proposed Sec. 668.59(c) would provide that, for the subsidized
student financial assistance programs, excluding the Federal Pell Grant
Program, if an applicant's FAFSA information changes as a result of
verification, the institution must recalculate the applicant's EFC and
adjust the applicant's financial aid package on the basis of the EFC on
the corrected SAR or ISIR.
With the exception of minor technical edits, proposed Sec.
668.59(d), which describes the consequences of a change in an
applicant's FAFSA information, would be substantively the same as
current Sec. 668.59(d).
Finally, we would remove current Sec. 668.59(e), the provision
that requires an institution to refer to the Department unresolved
disputes over the accuracy of information provided by the applicant if
the applicant received funds on the basis of that information.
Reasons: Some non-Federal negotiators objected to the Department's
proposal to require that all corrections to an applicant's FAFSA
information be submitted to the Department for reprocessing. They
argued that this approach would increase burden on both institutions
and applicants with minimum impact on an applicant's EFC and the amount
of assistance the applicant is eligible to receive. They recommended
that the Department require the submission of corrections only for
applicants receiving a Federal Pell Grant or if the corrections would
change an applicant's EFC. They did not object to removal of the
tolerances. Negotiators who offered their views indicated they did not
use the tolerances.
The Department believes that allowing any errors in financial and
nonfinancial information would undermine our efforts to make decisions
based on the best available information. We believe that requiring all
changes to an applicant's FAFSA data to be submitted to the Department
will enhance particularly our ability to identify error-prone
applications. We removed the tolerances because a change in an
applicant's FAFSA information could have a major impact on an
applicant's EFC, which would either reduce or increase an applicant's
Federal student aid awards. Taken together, the removal of the
tolerances and the requirement to report any errors in FAFSA data would
ensure that the Department can rely on accurate data for applicant
selection, EFC calculation, cross-year edits, and data analysis and
would make certain that applicants receive the Federal student aid
funds for which they are eligible.
Although proposed Sec. 668.59(a) would require an institution to
submit only changes affecting students receiving subsidized student
financial assistance, institutions are encouraged to submit all changes
in any student's FAFSA information because those changes could impact
the type of aid for which a student qualifies. For example, an
applicant who was initially eligible only for unsubsidized assistance
may qualify for subsidized assistance based on corrected FAFSA
information.
Proposed Sec. 668.59(b) would require an institution to
recalculate the applicant's Federal Pell Grant award based on the EFC
on the corrected SAR or ISIR and to disburse any additional funds only
after receiving a corrected SAR or ISIR. This requirement would ensure
that if the amount of the applicant's Federal Pell Grant increases as a
result of verification, the applicant would receive any additional
funds only after providing the institution with a corrected SAR or
ISIR. If the Federal Pell Grant award decreased as a result of
verification, the institution would be required to apply the procedures
specified in Sec. 668.61(a) to eliminate any overpayment. We are
proposing changes to the current regulatory requirements to ensure that
all applicants receive the Federal Pell Grant funds for which the
applicants are eligible and to ensure that the Department's database
reflects the information upon which any disbursements are based.
Under Sec. 668.59(c), the current exceptions to the requirement to
recalculate an applicant's EFC and adjust subsidized financial aid
awards other than Pell--for nondollar items and tolerance of net income
changes under $400--would be eliminated to ensure that all applicants
receive the amounts for which they are eligible and that the
Department's database reflects the information upon which any
disbursements are based.
Finally, we propose to remove current Sec. 668.59(e) because it
refers to an obsolete operational unit in the Department that resolved
verification discrepancies reported by an institution.
Deadlines for Submitting Documentation and the Consequences of Failing
To Provide Documentation (Sec. Sec. 668.60(b)(1)(ii), (b)(3) (c)(1),
and (d))
Statute: None.
Current Regulations: Current Sec. 668.60 contains the regulatory
requirements concerning the deadlines for submitting documentation when
a student is selected for verification and the consequences of failing
to provide documentation.
Current Sec. 668.60(b)(1)(ii) provides that if an applicant fails
to provide the requested documentation within a reasonable time period
established by the institution or the Secretary, the institution must
return to the lender or Secretary, as applicable, any Federal Stafford
Loan or Direct Subsidized Loan proceeds that otherwise would be payable
to the applicant.
[[Page 34833]]
Current Sec. 668.60(b)(3) provides that an institution may not
withhold any Federal Stafford Loan proceeds from an applicant for more
than 45 days for an applicant that fails to provide the requested
documents for verification within the time period established by the
institution. Under this provision, if the applicant does not complete
verification within 45 days, the institution must return the proceeds
to the lender.
Current Sec. 668.60(c)(1) grants an extension of the submission
deadline for students who must resubmit a verified SAR or ISIR when the
SAR or ISIR must be corrected. Under this provision, when an extension
is granted, the student is paid from the original SAR or ISIR or the
corrected SAR or ISIR depending upon which SAR or ISIR yields the lower
award.
Current Sec. 668.60(d) provides that the Secretary may determine
not to process any subsequent application for Federal Pell Grant, ACG,
or National SMART Grant program assistance, and an institution, if
directed by the Secretary, may not process any subsequent application
for campus-based, Federal Direct Stafford/Ford Loan, or Federal
Stafford Loan program assistance of an applicant who has been requested
to provide documentation until the applicant provides the documentation
or the Secretary decides that there is no longer a need for the
documentation.
Proposed Regulations: Proposed Sec. 668.60 would largely retain
the substance of current Sec. 668.60. In addition to minor clarifying
changes, we propose to remove paragraphs (b)(1)(ii) and (b)(3) of Sec.
668.60.
We would replace current Sec. 668.60(b)(3) with a provision that
would require an institution to follow the cash management procedures
under Sec. 668.166(a) or Sec. 668.166(b), or under Sec. 668.167(c),
(which incorporates the provisions of Sec. 668.167(b) by reference),
if the institution has received proceeds from a Subsidized Stafford
Loan and Direct Subsidized Loan and an applicant does not complete
verification within the time period specified. A description of these
cash management procedures follows.
Under Sec. 668.166(a), any proceeds from a Direct Subsidized Loan
that an institution has not disbursed to students by the end of the
third business day following the date the institution received those
funds is considered excess cash. Under Sec. 668.166(b), an institution
is allowed to maintain excess cash for seven days in an amount not to
exceed one percent of the total amount of funds it drew down in the
previous year. In instances where the Department finds that an
institution maintains excess cash for an amount or time period greater
than that allowed, an institution may be subject to adverse actions
(e.g., reimbursing the Secretary the cost incurred for providing the
excess cash to the institution, or providing funds to the institution
under the reimbursement or cash monitoring payment method) (see Sec.
668.166(c)).
For Subsidized Stafford Loans, Sec. 668.167(b)(1) requires an
institution to return to a lender loan proceeds if the institution does
not disburse the funds to a student or parent within (a) 10 business
days following the date the institution receives the loan funds if the
institution receives the funds by EFT and master check on or after July
1, 1997 but before July 1, 1999; (b) 3 business days following the date
the institution receives the loan funds if the institution receives the
funds by EFT and master check on or after July 1, 1999; or (c) 30 days
after the institution receives the loan funds by check. For funds that
are not disbursed within the specified timeframe, Sec. 668.167(b)(2)
requires the institution to return the funds to the lender no later
than 10 business days after the last day those funds are required to be
disbursed. If the borrower establishes eligibility before the
institution returns the loan funds to the lender, the institution may
disburse those funds to the borrower (see Sec. 668.167(b)(3)).
In proposed Sec. 668.60(c)(1), we would remove the language that
requires a student to receive the lowest amount of a Federal Pell Grant
if the student submits a valid SAR or valid ISIR after verification
while the student was no longer enrolled.
Proposed Sec. 668.60(d) and (e) contain only editorial changes
from the corresponding current regulations.
Reasons: We propose to remove paragraph (b)(1)(ii) of Sec. 668.60.
This paragraph refers to an outdated process that prohibits an
institution from certifying the student's loan application or
processing a check, and requires the check payable to the student to be
returned to the lender for any student who does not provide the
required verification information within the required reasonable time.
The proposed changes to Sec. 668.60(b)(3) are needed to update
these regulations to be consistent with the Department's current cash
management policy.
In proposed Sec. 668.60(c)(1), we would remove the limit placed on
students that complete verification while no longer enrolled at an
institution. We made this change because students should be permitted
to receive the correct amount of Federal Pell Grant regardless of when
they complete verification.
Recovery of Funds (Sec. 668.61(c))
Statute: None.
Current Regulations: Current Sec. 668.61 describes the
institution's obligation to recover funds if the institution discovers,
as a result of the verification process, that an applicant received or
would receive more financial aid than the applicant was eligible to
receive.
Proposed Regulations: Proposed Sec. 668.61 would retain the
substance from current Sec. 668.61, except that we would add a
paragraph (c) that would require an institution to reimburse the
program account using its own funds if it disbursed subsidized student
financial assistance to an applicant without receiving his or her
corrected SAR or ISIR within the established deadlines under Sec.
668.60.
Reasons: We propose this change to Sec. 668.61 to clarify what
would happen if institutions did not submit corrections and to
emphasize the liability an institution could face if subsidized student
financial assistance is disbursed under Sec. 668.58(a)(3) (interim
disbursements) and the institution does not receive a corrected SAR or
ISIR by the deadline date established in the notice of deadline dates
for receipt of applications, reports, and other records published
annually pursuant to Sec. 668.60.
Some non-Federal negotiators argued that the proposed requirement
to make institutions liable for funds disbursed in accordance with
Sec. 668.58(a)(3) is unreasonable given that the interim disbursement
would not result in an applicant receiving an overpayment of title IV,
HEA program funds.
Section 668.58(a)(3) was added at the request of non-Federal
negotiators who wanted institutions to have the flexibility to disburse
title IV, HEA program funds to students without having to wait for a
corrected SAR or ISIR when a student's award did not change after
completing verification. Under this provision, the disbursement would
be allowed if the institution ensured that all corrections were
submitted to the Department for reprocessing.
Therefore, we believe it is appropriate to hold institutions liable
for disbursing aid if corrections are not submitted to the Department
in a timely manner to allow the institution to receive the corrected
SAR or ISIR within the deadlines established in Sec. 668.60. This
provision would also help in our efforts to obtain accurate information
for data analysis and identification of error prone applications.
[[Page 34834]]
Moreover, an institution is not required to make an interim
disbursement of title IV, HEA program funds to an applicant. However,
if an institution exercises this option, it assumes liability for the
funds disbursed.
Misrepresentation (Subpart F of Part 668)
Statute: Section 487 of the HEA provides that institutions
participating in the title IV, HEA programs shall not engage in
substantial misrepresentation of the nature of the institution's
educational program, its financial charges, or the employability of its
graduates.
General
Current regulations: Current subpart F of part 668 sets forth the
types of consumer information statements and communications by an
eligible entity that constitute misrepresentation. The regulations
prohibit any substantial misrepresentation made by an institution
regarding the nature of its educational program, its financial charges,
or the employability of its graduates.
Proposed regulations: In the following paragraphs, we explain in
detail the changes we propose to make to subpart F of part 668.
Reasons: We propose to make changes to subpart F of part 668 to
strengthen the Department's regulatory enforcement authority against
eligible institutions that engage in substantial misrepresentations.
The Department oft-times receives complaints from students who allege
that they were the victims of false promises and other forms of
deception when they were considering their postsecondary educational
opportunities. We believe that helping students to make sound decisions
regarding their educational pursuits is essential to maintaining the
integrity of the title IV, HEA programs.
For these reasons, we propose to revise subpart F of part 668 by
making changes based on information the Department has received and
comments from participants in the negotiated rulemaking meetings.
Scope and Special Definitions (Sec. 668.71)
Current regulations: Current Sec. 668.71(a) describes the scope of
subpart F of part 668 as establishing the standards and rules by which
the Secretary may initiate a proceeding under subpart G of part 688
against an otherwise eligible institution for any substantial
misrepresentation made by that institution regarding the nature of its
educational program, its financial charges, or the employability of its
graduates.
Current Sec. 668.71(b) provides definitions for the terms
misrepresentation, prospective students, and substantial
misrepresentation.
Proposed regulations: We propose to restructure Sec. 668.71 so
that paragraph (a) describes the actions the Secretary may take if the
Secretary determines that an eligible institution has engaged in
substantial misrepresentation.
Paragraph (b) of proposed Sec. 668.71 would--
Describe generally what types of activities constitute
substantial misrepresentation;
Provide that an eligible institution is deemed to have
engaged in substantial misrepresentation when the institution itself,
one of its representatives, or any ineligible institution,
organization, or person with whom the eligible institution has an
agreement, makes a substantial misrepresentation regarding the eligible
institution, including about the nature of its educational program, its
financial changes, or the employability of its graduates; and
Clarify that substantial misrepresentations are prohibited
in all forms.
Current Sec. 668.71(b) would be redesignated as proposed Sec.
668.71(c) and we would make a number of revisions to the definition of
the term misrepresentation:
We would clarify that a misrepresentation is any false,
erroneous, or misleading statement an eligible institution, one of its
representatives, or any ineligible institution, organization, or person
with whom the eligible institution has an agreement makes directly or
indirectly to a student, prospective student or any member of the
public, or to an accrediting agency, to a State agency, or to the
Secretary.
Within this definition, we would also define what we mean
by the term ``misleading statement;'' we would clarify that a
misleading statement includes any statement (which is any communication
made in writing, visually, orally, or through other means) that has the
capacity, likelihood, or tendency to deceive or confuse.
Finally, we would retain the express reference in the
definition of misrepresentation to the dissemination of a student
endorsement or testimonial that a student gives under duress. We would
expand this language to also refer to the dissemination of a student
endorsement or testimonial that a student gives because the institution
required the student to make such an endorsement or testimonial to
participate in a program.
Reasons: We propose to restructure Sec. 668.71 to lay out more
clearly the scope of subpart F of part 668.
In new paragraph (b) of proposed Sec. 668.71, we would clarify
that an eligible institution is deemed to have engaged in substantial
misrepresentation when the institution itself, one of its
representatives, or any ineligible institution, organization, or person
with whom the eligible institution has an agreement, makes a
substantial misrepresentation regarding the eligible institution. We
believe it is appropriate to hold the eligible institution accountable
in these instances because the integrity of the title IV, HEA programs
requires that institutions are responsible for the actions of their
representatives and agents.
Proposed Sec. 668.71(b) would also state that substantial
misrepresentations are prohibited in all forms, including those made in
any advertising, promotional materials, or in the marketing or sale of
courses or programs of instruction offered by the institution. We
propose to add this language because of the importance of these
materials and activities in communicating to students and prospective
students information regarding the nature of the institution's
educational programs, its financial charges, and the employment
opportunities available to the institution's graduates.
In the revised definition of the term misrepresentation, we would
again state that a misrepresentation is any false, erroneous, or
misleading statement made not only by the eligible institution, but
also any false, erroneous, or misleading statement made by one of its
representatives, or any ineligible institution, organization, or person
with whom the eligible institution has an agreement. As discussed
earlier in this preamble, we believe that it is appropriate to hold
eligible institutions accountable for misrepresentations made by
representatives and agents to ensure program integrity.
We propose to broaden the definition of misrepresentation to
include false, erroneous, or misleading statements made directly or
indirectly to a student, prospective student or any member of the
public, or to an accrediting agency, to a State agency, or to the
Secretary. We propose to broaden the concept of misrepresentation to
include both direct and indirect false, erroneous or misleading
statements because students, prospective students, members of the
public, and others can be significantly
[[Page 34835]]
harmed by indirect false, erroneous, or misleading statements. For
example, an institution could be deemed to engage in misrepresentation
if it falsely advertised an exceptional placement rate. Further, the
institution could also be deemed to engage in misrepresentation if an
individual heard an advertisement containing the false placement rate
and relayed the information to a potential student. In this example,
the potential student received the information indirectly but the
information could still have the capacity, likelihood, or tendency to
deceive or confuse.
In an effort to give the field more guidance on what the Department
means by misrepresentation, we propose to provide more detail in the
definition. Because the definition of misrepresentation turns on the
meaning of the term a ``statement'', we would clarify that a misleading
statement includes any statement (which is any communication made in
writing, visually, orally, or through other means) that has the
capacity, likelihood, or tendency to deceive or confuse. We believe
that fleshing out the definition of misrepresentation would help
institutions determine whether statements they (or their
representatives or any ineligible institution, organization, or person
with whom they have an agreement) make constitute a misrepresentation
under subpart F of part 668. Moreover, by providing more detail in the
definition of misrepresentation, we believe that the regulations would
be clearer as to the difference between misrepresentations, on the one
hand, and substantial misrepresentations, on the other. This subpart
would prohibit substantial misrepresentations only and those would
continue to be defined as any misrepresentation on which the person to
whom it was made could reasonably be expected to rely, or has
reasonably relied, to that person's detriment.
Finally, we would add language to the definition of
misrepresentation regarding the dissemination of a student endorsement
or testimonial that a student gives because the institution required
the student to make such an endorsement or testimonial to participate
in a program. We propose to add this language because we are concerned
about the potential of such testimonials to mislead students or
prospective students.
Nature of Educational Program (Sec. 668.72)
Current regulations: Current Sec. 668.72 describes the types of
false, erroneous, or misleading statements about an institution's
educational program that would be prohibited as misrepresentations
under subpart F of part 668.
Proposed Regulations: Proposed Sec. 668.72 would retain the list
of the types of misrepresentation regarding the nature of an
institution's educational program that is included in current Sec.
668.72, but would expand this list. First, in proposed Sec. 668.72(a),
we would expand the types of programmatic false statements that would
be prohibited as misrepresentations under this section. Specifically,
false, erroneous, or misleading statements about programmatic and
specialized accreditation--not only institutional accreditation--would
be expressly covered as misrepresentations.
Second, in proposed Sec. 668.72(b)(2), we propose to add language
on the conditions under which an institution will accept credits earned
at another institution.
Third, in proposed Sec. 668.72(c), we would revise the language
regarding misrepresentations about whether successful completion of a
course of instruction qualifies a student to receive a local, State, or
Federal license or a non-governmental certification required as a
precondition for employment, or to perform the functions required of an
employee in the occupation for which the program is represented to
prepare students. We would broaden this language to clarify that a
prohibited misrepresentation includes false, erroneous, or misleading
statements regarding whether completion of a given course of study will
qualify a student ``to apply to take or to take an examination required
to receive'' a needed license or certification as a precondition of
employment in an occupation for which the program is represented to
prepare its students (rather than only qualifying a student to receive
such a license or certification).
In addition, we would refine the language in Sec. 668.72(c)(2) to
clarify that institutions must not make false, erroneous, or misleading
statements regarding whether completion of a given course of study will
qualify a student to perform certain functions in the State in which
the program or institution is located, or to meet additional conditions
that the institution knows, or reasonably should know, are generally
needed to secure employment in a recognized occupation for which the
program is represented to prepare students.
Finally, we would add to the list of the types of
misrepresentations regarding the nature of an institution's educational
program, any misrepresentation regarding:
The requirements for successfully completing the course of
study or program and the circumstances that would constitute grounds
for terminating the student's enrollment (see proposed Sec.
668.72(d)).
Whether the institution's courses have been the subject of
unsolicited testimonials or endorsements by vocational counselors, high
schools, colleges, educational organizations, employment agencies,
members of a particular industry, students, former students, or others;
or governmental officials for governmental employment (see proposed
Sec. 668.72(e)).
The subject matter, content of the course of study, or any
other fact related to the degree, diploma, certificate of completion,
or any similar document that the student is to be, or is, awarded upon
completion of the course of study (see proposed Sec. 668.72(m)).
Whether the academic, professional, or occupational degree
that the institution will confer upon completion of the course of study
has been authorized by the appropriate State educational agency. This
type of misrepresentation includes, in the case of a degree that has
not been authorized by the appropriate State educational agency, any
failure by an eligible institution to disclose this fact in any
advertising or promotional materials that reference such degree (see
proposed Sec. 668.72(n)).
Reasons: The Department believes it is critical that potential
students have a clear understanding about any educational program in
which they may enroll. Each institution has a responsibility to provide
complete and accurate information about the programs it offers. For
this reason, we are proposing numerous changes to Sec. 668.72. Many of
these proposed changes are based on discussions during the negotiated
rulemaking sessions and the concerns raised by non-Federal negotiators
during those discussions.
Several non-Federal negotiators believed that institutions should
make potential or current students aware of institutional accreditation
or any specific programs at the institution that have accreditation
before students enroll in the program. Some negotiators also argued
that an institution's failure to disclose a lack of accreditation
should constitute misrepresentation under Sec. 668.72. The Department
agrees that students need accurate information about the types,
sources, nature, and extent of institutional, programmatic or
specialized accreditation an institution or program has. Proposed Sec.
668.72(a) would expressly prohibit institutions from making false,
erroneous, or
[[Page 34836]]
misleading statements concerning these matters.
Some non-Federal negotiators expressed concern that students should
understand the conditions under which their transfer credits would
count towards a degree program before they left another program or
institution. The Department agrees and proposes to add Sec.
668.72(b)(2) to expressly prohibit misrepresentations about the
conditions under which an institution will accept credits earned at
another institution.
Some non-Federal negotiators expressed concern about the extent of
information that institutions ``reasonably'' should know. For example,
they argued that it is unrealistic to expect institutions to have
knowledge about each State's licensure requirements.
The Department agrees. Proposed Sec. 668.72(c)(2), therefore,
would specifically refer to licensure and certification information for
the State in which the program or institution is located, as well as
conditions generally needed to secure employment in a particular
occupation.
We would add proposed Sec. 668.72(d), regarding misrepresentations
concerning the requirements for successfully completing the course of
instruction and the circumstances that would constitute grounds for
terminating the student's enrollment, because potential and current
students need to be able to make informed decisions regarding course
completion and situations that may lead to their inability to complete
the program of instruction they choose to pursue.
In proposed Sec. 668.72(e), we would expressly include as
prohibited any misrepresentations regarding whether an institution's
courses have been the subject of unsolicited testimonials or
endorsements because potential and current students should not be
mislead into pursuing a particular program of instruction based upon
purported (but not actual) recommendations and endorsements.
We would add proposed Sec. 668.72(m) and (n), regarding
misrepresentations concerning any fact related to the degree, diploma,
certificate of completion, or similar document to be awarded to a
student upon course completion, as well as whether the academic,
professional, or occupational degree that the institution confers upon
completion has been authorized by the appropriate State educational
agency. We propose adding these provisions because potential and
current students need to know the truth regarding the credential they
will receive before committing to attend a particular postsecondary
institution.
Nature of Financial Charges (Sec. 668.73)
Current regulations: Current Sec. 668.73 describes prohibited
false, erroneous, or misleading statements related to the cost of the
program and financial aid that is available to potential and current
students.
Proposed regulations: Proposed Sec. 668.73 would retain the list
of the types of misrepresentation regarding the nature of an
institution's financial charges that are in current Sec. 668.73, but
also would add the following:
Misrepresentation regarding the cost of the program and
the institution's refund policy if the student does not complete the
program (see proposed Sec. 668.73(c)).
Misrepresentation regarding the availability or nature of
any financial assistance offered to students, including a student's
loan repayment responsibility, regardless of program completion or
subsequent employment (see proposed Sec. 668.73(d)).
Misrepresentation regarding a student's right to apply for
or reject any particular type of financial aid or other assistance (see
proposed Sec. 668.73(e)).
Reasons: Several non-Federal negotiators expressed concern about
whether students clearly understand the cost of their educational
program. Other non-Federal negotiators emphasized the difficulty of
estimating program costs and cautioned the Department against making
the regulations too specific in this regard. The Department agrees it
is a serious problem if students who enroll in a program do not have
the necessary information about the cost of the program or the
institution's refund policy. For this reason, the Department proposes
to add proposed Sec. 668.73(c) to highlight that misrepresentations
about the cost of an institution's program or its refund policy are
prohibited.
In addition, some non-Federal negotiators pointed out as a
significant problem the fact that some students do not understand the
financial aid options available to them when they enroll in a program.
Others expressed concern that students may feel pressure to apply for
credit financing to pay for the cost of their educational program.
The Department strongly believes that students, potential students,
and parents must have relevant information to make informed decisions
about the type of financial aid that is available to the student. By
prohibiting institutions from making misrepresentations regarding the
availability or nature of the financial aid offered to students, as
well as a student's right to reject any particular type of financial
aid (see proposed Sec. 668.73(d) and (e), respectively), the
Department seeks to ensure that students are provided with the accurate
information they need to make informed choices about the type of
financial aid they use to fund their education.
Employability of Graduates (Sec. 668.74)
Current regulations: Current Sec. 668.74 lists what constitutes
misrepresentation by an institution regarding the employability of its
graduates.
Proposed regulations: Proposed Sec. 668.74 would retain the list
of the types of misrepresentation regarding the employability of
graduates that is in current Sec. 668.74. In addition to the types of
misrepresentations already included in the regulations, we would add
the following:
Misrepresentations relating to the institution's knowledge
about the current or likely future conditions, compensation, or
employment opportunities for its graduates (see proposed Sec.
668.74(c)).
Misrepresentations relating to whether employment is being
offered by the institution or that a talent hunt or contest is being
conducted (see proposed Sec. 668.74(d)).
Misrepresentations relating to other requirements that are
generally needed in order to be employed in certain fields (see
proposed Sec. 668.74(f)).
Reasons: During the negotiated rulemaking sessions, the non-Federal
negotiators appeared to be in agreement that students should be fully
informed about their likely employment options once they complete a
course of study. Several non-Federal negotiators, however, expressed
concern about how best to address this issue in the regulations. In
particular, given the uncertainty of the economic climate, they were
concerned about the possibility of having an enforcement action brought
against them even in instances when they provided students and the
public with the best available information about likely employment
options, which, in retrospect, were overly optimistic. The Department
believes that proposed Sec. 668.74 appropriately highlights the types
of information about employability that institutions need to monitor
carefully when advertising or otherwise promoting their educational
programs. Institutions must disclose clear information about the
employability of graduates from a program, including likely
compensation, and other requirements necessary to perform the job for
which the educational program prepares students, to help give students
the knowledge they need to make
[[Page 34837]]
informed decisions about potential career paths.
Relationship With the Department of Education (Sec. 668.75)
Current regulations: Current Sec. 668.75 describes the
Department's procedures for reviewing allegations or complaints
regarding misrepresentation claims.
Proposed regulations: We are proposing to delete current Sec.
668.75 (Procedures) and replace it with new Sec. 668.75 (Relationship
with the Department of Education). Proposed Sec. 668.75 would prohibit
an institution, its representatives, or any ineligible institution,
organization, or person with whom the eligible institution has an
agreement from making statements that suggest the U.S. Department of
Education approves or endorses the quality of an institution's
educational program simply because the institution is eligible to
participate in the title IV, HEA programs.
Reasons: We propose to remove current Sec. 668.75 because these
procedures have not been used to take enforcement actions against
institutions for making substantial misrepresentations. Instead, when
the Department determines that there has been a misrepresentation by an
institution, its representatives, or any ineligible institution,
organization, or person with whom the eligible institution has an
agreement, the Department has used its other administrative remedies to
take the appropriate actions against the institution without relying
upon the procedures described in current Sec. 668.75. Proposed Sec.
668.71(a) addresses the types of actions the Department anticipates it
may take in response to a violation of subpart F of part 668.
We propose to add new Sec. 668.75 because the Secretary has been
made aware of instances where institutions have misled the public by
mentioning the U.S. Department of Education in their advertising in a
manner that implies that the Department endorses the quality of these
institutions' educational programs. The Department does not approve of
this behavior and considers it to be a misrepresentation. For this
reason, the proposed regulations would expressly forbid this type of
activity.
Ability To Benefit (668.32 and Subpart J of Part 668)
Statute: Section 484(d) of the HEA describes the circumstances
under which a student who does not have a high school diploma or the
equivalent may establish eligibility for title IV, HEA program funds.
Under this provision, a student who does not have a high school diploma
or the equivalent may establish eligibility for title IV, HEA program
funds by: (1) Taking an ability to benefit (ATB) test approved by the
Secretary; (2) being enrolled in an institution that participates in an
approved State process; or (3) by completing a secondary school
education in a home school setting that is treated as a home school or
private school under State law. In 2008, this section of the HEA was
amended by adding section 484(d)(4), which provides that a student
shall be determined by an institution of higher education as having the
ability to benefit from the education or training offered by the
institution of higher education upon satisfactory completion of six
credit hours or the equivalent coursework that are applicable toward a
degree or certificate offered by the institution.
Student Eligibility (Sec. 668.32(e))
Current Regulations: Paragraph (e) of current Sec. 668.32 provides
that, in order to be eligible for title IV, HEA program funds, a
student must: (1) Have a high school diploma or its recognized
equivalent; (2) have obtained a passing score on an ATB test
administered in accordance with subpart J of part 668; (3) have been
enrolled in an eligible institution that participates in a State
process approved by the Secretary under subpart J of part 668; or (4)
have been home-schooled and have obtained a secondary school completion
credential for home school or, if State law does not require a home-
schooled student to obtain such a credential, have completed a
secondary school education in a home school setting that qualifies as
an exemption from compulsory attendance requirements under State law.
Proposed Regulations: We propose to revise Sec. 668.32(e) by
adding new paragraph (e)(4) to provide that a student is eligible to
receive title IV, HEA program assistance if the student has been
determined by the institution to have the ability to benefit from the
education or training offered by the institution based on the
satisfactory completion of 6 semester hours, 6 trimester hours, 6
quarter hours, or 225 clock hours that are applicable toward a degree
or certificate offered by the institution.
Reasons: We propose to add new paragraph (e)(4) to Sec. 668.32 to
incorporate the new method for students to show that they have the
ability to benefit, which was added to the section 484(d) of the HEA in
2008. Under this new statutory provision, students who satisfactorily
complete six credits of college work, or the equivalent amounts of
coursework, that are applicable to a degree or certificate offered by
the school qualify to receive title IV, HEA program funds. In proposing
regulations to implement this statutory change, the Department took
into consideration extensive discussions at the negotiated rulemaking
sessions.
The Department explained during negotiated rulemaking that its
proposal was based on the statutory language that students would need
to earn six credit hours or the equivalent. The statute does not
distinguish among semester, trimester or quarter hours, nor does it
suggest an equivalent number of clock hours. Under the proposed
regulations and the statute, all credit hour students, whether earning
semester, trimester, or quarter hours would need to be enrolled for six
hours--the number of hours that would be equivalent to enrollment on a
half-time basis for one term. A student who completed 6 semester hours,
6 trimester hours, or 225 clock hours would be completing one quarter
of an academic year. The Federal negotiator noted the apparent
inconsistency between the statutory language regarding the new ATB
provision, which requires satisfactory completion of six credit hours
or the equivalent coursework, and the definition of an ``academic
year'', which is defined as a period of time during which a full-time
undergraduate student is expected to complete 24 semester or trimester
hours, 36 quarter hours, or 900 clock hours. Several non-Federal
negotiators expressed their belief that completion of six hours of
program leading to a certificate or degree was a much better indicator
of an individual's ability to benefit from a program than passing an
ATB test.
Some of the discussion at the negotiated rulemaking sessions
focused on whether a student should be required to complete the
specified credit hours or clock hours in the program in which the
student planned to enroll and for which the student applied to receive
title IV, HEA program funds. The Department noted that the provision
was based on an experimental site program which tested and established
the effectiveness of permitting students to display the ability to
benefit based on successful completion of six semester hours in any
program leading to a degree or certificate. One non-Federal negotiator
expressed concern that unless the hours completed were in the intended
program, the coursework might not be rigorous enough, and the provision
would not be effective as a means of demonstrating the student's
ability to
[[Page 34838]]
benefit from the program in which they intend to enroll. Several non-
Federal negotiators voiced their view that the statutory language did
not impose that kind of limitation. They pointed out that students
often start a program and change their mind; therefore, the simplest
approach to the provision would be the best. The Department agrees, but
expects that the credit hours completed would be part of an eligible
program offered by the institution and would show that the student has
the ability to benefit from the postsecondary educational program in
which the student is enrolled or intends to enroll.
One non-Federal negotiator expressed concern that some institutions
might reduce or waive tuition for the portion of the program required
to demonstrate the ability to benefit, while not requiring the student
to complete coursework at a sufficiently challenging level, thereby
nullifying the impact of the provision and setting a student up for
failure. Other non-Federal negotiators pointed out that if an
institution did not waive or reduce tuition, a student who did not yet
qualify for aid might be forced to take out a high interest private
loan to pay for the initial 6 credit hours or 225 clock hours needed to
establish student eligibility.
In response to a question regarding whether the option to
demonstrate the ability to benefit from the educational or training
program by passing an approved test or successfully completing six
credit hours or the equivalent was at the discretion of the student or
the institution, the Department noted that the provision relates to
establishing eligibility for assistance under the title IV, HEA
programs. It is a financial aid requirement, not an admissions
requirement. An institution may have a policy that it does not admit
any students who do not have a high school diploma or the equivalent.
There is no requirement that an institution determine a student's
eligibility for title IV, HEA program funds on the basis of either
passing an ATB test or successfully completing coursework.
There was considerable discussion during the negotiated rulemaking
sessions regarding whether a student who established student
eligibility under one of the ATB provisions could be paid for the
payment period in which eligibility was established. The Department's
position is that a student who establishes eligibility for title IV,
HEA program funds by passing an ATB test during a payment period may be
paid for the entire payment period. However, if a student establishes
title IV, HEA eligibility by completing six credit hours, or the
equivalent, eligibility is not established until after the end of the
payment period, and the student may not be paid for the payment period
during which the student took the requisite coursework. Furthermore, to
establish eligibility under the new ATB provision, a student in a
credit hour program must earn six credit hours; a student who enrolls
in six credit hours but receives a failing grade for one or more of
those credits has not successfully completed six credit hours.
Similarly, a student in a clock hour program must have attended 225
clock hours and been graded on those 225 clock hours to establish
eligibility.
Scope (Sec. 668.141)
Current Regulations: Current Sec. 668.141 describes the scope of
subpart J of part 668 of the current regulations. Current subpart J
sets forth: (1) The provisions under which a student who does not have
a high school diploma or the equivalent may establish eligibility for
title IV, HEA program funds either by taking an ATB test approved by
the Secretary or by being enrolled in an institution that participates
in an approved State process; and (2) the criteria and procedures for
approval of ATB tests, the requirements for independent administration
of approved tests, the requirements for maintaining the Secretary's
approval of ATB tests, and the procedures for the Secretary's approval
of alternate State processes.
Proposed Regulations: Section 668.141 would be revised to reference
the new requirements that we propose to add to subpart J of part 668.
Specifically, we would redesignate current paragraph (b)(4) of Sec.
668.141 as paragraph (b)(6) and add new paragraphs (b)(4) and (b)(5).
Proposed Sec. 668.141(b)(4) would reference the information on test
anomaly studies that the test publishers and States must submit as part
of their test submission, and proposed Sec. 668.141(b)(5) would
reference the proposed requirements that test publishers and States
have a process to identify and follow up on test score irregularities,
take corrective action when irregularities have occurred, and report
the names of decertified test administrators to the Secretary.
Reason: These proposed changes to Sec. 668.141 would align the
description of the subpart's scope with the substantive changes the
Department proposes to make to this subpart. These proposed changes are
discussed in more detail in the following sections.
Special Definitions (Sec. 668.142)
Definition of Assessment Center
Current regulations: Current Sec. 668.142 contains a definition of
the term assessment center.
Proposed regulations: The proposed definition of assessment center
would largely track the current definition of that term. We propose
only to clarify in the definition that an assessment center uses test
administrators who, by definition, have been certified by the test
publisher or State to administer ATB tests approved by the Secretary
under this subpart.
Reasons: We propose to require, as part of this definition, that
the individuals who administer ATB tests in assessment centers be
certified by the test publisher, or the State, as appropriate. Test
publishers have indicated that they have encountered situations at
assessment centers where there has been high staff turnover, and
individuals giving tests are not familiar with the requirements and
procedures. The Department solicits comments on whether it would be
appropriate or advisable to permit specified test administrators in the
assessment center to train other individuals at that assessment center
to administer ATB tests.
Definition of Independent Test Administrator
Current regulations: None.
Proposed regulations: We propose to add a definition of the term
independent test administrator to Sec. 668.142. Under this proposed
definition, an independent test administrator would be a test
administrator who administers tests at a location other than an
assessment center and who--
(1) Has no current or prior financial or ownership interest in the
institution, its affiliates, or its parent corporation, other than the
interest obtained through its agreement to administer the test, and has
no controlling interest in any other institution;
(2) Is not a current or former employee of or consultant to the
institution, its affiliates, or its parent corporation, a person in
control of another institution, or a member of the family of any of
these individuals;
(3) Is not a current or former member of the board of directors, a
current or former employee of or a consultant to a member of the board
of directors, chief executive officer, chief financial officer of the
institution, its affiliates, or its parent corporation or of any other
institution, or a member of the family of any of these individuals; and
[[Page 34839]]
(4) Is not a current or former student of the institution.
This definition would be based largely on the description of
prohibited relationships of independent test administrators contained
in current Sec. 668.151(b)(2).
Reasons: The proposed regulations would distinguish between ``test
administrators,'' defined in Sec. 668.142, and ``independent test
administrators.'' For this reason, the Department proposes to add a
definition of the term independent test administrator and, as discussed
later in this preamble, to revise the current definition of test
administrator.
The concept of an independent test administrator is not new.
Current Sec. 668.151(b)(2) describes the circumstances under which a
test given by a test administrator is considered to be ``independently
administered''. We used much of this language in crafting the
definition of the term independent test administrator.
During the negotiated rulemaking discussions, some of the non-
Federal negotiators expressed confusion about the difference between
test administrators and independent test administrators. They suggested
adding language to make it clear that an independent test administrator
is a test administrator who ``administers tests at a location other
than an assessment center'' in addition to meeting the other
requirements. We agreed with this recommendation. Therefore, the
proposed regulations would specify, as part of the definition of
independent test administrator, that an independent test administrator
is a test administrator who administers tests at a location other than
at an assessment center.
Definition of Individual With a Disability
Current regulations: Current Sec. 668.142 contains a definition of
the term disabled student.
Proposed regulations: Proposed Sec. 668.142 would replace the term
``disabled student'' with the term ``individual with a disability.'' We
would largely retain the current definition, except we would make clear
that the term refers to a person (not only a student) who has a
physical or mental impairment which substantially limits one or more
major life activities, has a record of such an impairment, or is
regarded as having such an impairment.
Reasons: The Department proposes to use the term individual with a
disability, rather than disabled student, because that is the term more
commonly used in the disability community and is consistent with the
usage of the term by other programs administered by the Department. In
addition, this proposed revision would clarify that the defined term
applies to individuals who are not yet students as well as to
individuals who are already enrolled in institutions participating in
the title IV, HEA programs.
Definition of Test
Current regulations: None.
Proposed regulations: We propose to add a definition of the term
test to Sec. 668.142. Under this proposed definition, a test would be
a standardized test, assessment or instrument that has formal protocols
regarding the administration of the test that include the use of
parallel, equated forms, testing conditions, time allowed for the test,
and standardized scoring. The definition also would clarify that tests
are not limited to traditional paper and pencil (or computer-
administered) instruments for which forms are constructed prior to
administration to examinees and that tests may include adaptive
instruments that use computerized algorithms for selecting and
administering items in real time provided that, for such instruments,
the size of the item pool and the method of item selection ensures
negligible overlap in items across retests.
Reasons: We propose to add a definition of the term test to Sec.
668.142 because, as one non-Federal negotiator pointed out during our
discussions, our current ATB regulations define the terms test item,
test administrator and test publisher, but do not define the term test.
The proposed definition is based on the definition of test in 34 CFR
462.4 of the Department's Measuring Educational Gain in the National
Reporting System for Adult Education regulations.
Definition of Test Administrator
Current regulations: Current Sec. 668.142 defines a test
administrator as an individual who may give tests under subpart J of
part 668.
Proposed regulations: We propose to revise the definition of the
term test administrator to mean an individual who (1) is certified by
the test publisher or the State to administer tests approved under
subpart J of part 668 and to protect the test and test results from
improper disclosure or release, and (2) is not compensated on the basis
of test outcomes.
Reasons: We propose to revise this definition to clarify that a
test administrator must be certified by the test publisher or the
State, and that a test administrator is responsible for keeping both
the tests and the test results secure from improper disclosure or
release. The proposed definition would also clarify that a test
administrator may not be compensated on the basis of test outcomes. The
non-Federal negotiators were generally in favor of including this
additional clarity in the definition.
Definition of Test Publisher
Current regulations: Current Sec. 668.142 defines a test publisher
as an individual, organization, or agency that owns a registered
copyright of a test, or is licensed by the copyright holder to sell or
distribute a test.
Proposed regulations: We propose to revise the definition of a test
publisher by providing that a test publisher may be authorized by the
copyright holder to represent the copyright holder's interest regarding
the test, rather than specifying that the individual or organization
must be licensed the right to sell or distribute the test by the
copyright holder.
Reasons: One non-Federal negotiator recommended making this
revision to the definition of test publisher. This non-Federal
negotiator explained that this definitional change is appropriate
because the term test publisher should include agencies or
organizations that may represent the copyright holder's interest in the
test, but may not be licensed by the copyright holder. The Department
agrees.
Approval of State Tests or Assessments (Sec. 668.143)
Current regulations: Current Sec. 668.143 describes the procedures
for the Secretary's approval of State tests or assessments.
Proposed regulations: We propose to move the requirements governing
the submission of tests by States in current Sec. 668.143 to proposed
Sec. 668.144 (Application for test approval). With this change, we
would reserve Sec. 668.143 for future use.
Reason: We propose to combine the requirements from current
Sec. Sec. 668.143 and 668.144 into a single section because the test
publisher and State submission processes have common elements. To the
extent we propose to make changes to the submission requirements for
States (and test publishers), we discuss those changes in the
discussion relating to proposed Sec. 668.144.
Application for Test Approval (Sec. 668.144)
Current regulations: Current Sec. 668.144 describes the approval
process for tests submitted by test publishers. The current regulations
do not require test publishers to describe their process for
[[Page 34840]]
certifying test administrators, their test anomaly analysis, or the
types of accommodations available for individuals with disabilities. In
current regulations, the requirements for approval of State tests or
assessments are contained in a separate section, Sec. 668.143.
Proposed regulations: We propose to clarify and expand the
requirements in current Sec. Sec. 668.143 and 668.144 and include all
of the requirements for test approval in one section, proposed Sec.
668.144. Paragraphs (a) and (b) of proposed Sec. 668.144 would
describe the general requirement for test publishers and States to
submit to the Secretary any test they wish to have approved under
subpart J of part 668. Paragraph (c) of proposed Sec. 668.144 would
describe the information that a test publisher must include with its
application for approval of a test. Paragraph (d) of proposed Sec.
668.144 would describe the information a State must include with its
application when it submits a test to the Secretary for approval.
In proposed Sec. 668.144(c), we would largely retain the test
publisher application requirements contained in current Sec.
668.144(c). In addition to making some minor technical changes to these
requirements, we would revise paragraphs (c)(8) and (c)(11)(iv)(B).
Under proposed paragraph (c)(8), test publishers would be required to
provide documentation of periodic reviews of the content and
specifications of all tests submitted to the Secretary for approval
(not just tests first published five years before submission), to
ensure that the tests reflect secondary school level verbal and
quantitative skills.
Under the revisions reflected in proposed Sec.
668.144(c)(11)(iv)(B), a test publisher would be required to include,
in its technical manual, evidence that the test was normed using a
contemporary sample that is representative of the population of persons
who have earned a high school diploma in the United States instead of a
contemporary population representative of persons who are beyond the
usual age of compulsory school attendance in the United States.
We would remove paragraph (c)(14), which required a test publisher
to include, for performance-based tests or tests containing
performance-based sections, a description of the training or
certification required of test administrators and scorers by the test
publishers.
We would then redesignate paragraphs (c)(15) and (c)(16) of Sec.
668.144 as proposed paragraphs (c)(14) and (c)(15) and add new proposed
paragraphs (c)(16) through (c)(18). Proposed Sec. 668.144(c)(16) would
require test publishers to include in their applications a description
of their test administrator certification process. In proposed Sec.
668.144(c)(17), we would require test publishers to include in their
applications a description of the test anomaly analysis the test
publisher will conduct and submit to the Secretary. Finally, proposed
Sec. 668.144(c)(18) would require test publishers to include in their
applications a description of the types of accommodations available for
individuals with disabilities, including a description of the process
used to identify and report when accommodations for individuals with
disabilities were provided.
Proposed Sec. 668.144(d) would be added to describe what States
must include in their test submissions to the Secretary. While this
provision would replace the content in current Sec. 668.143, its
language would be revised to be parallel, where appropriate, to the
test publisher submission requirements in current Sec. 668.144. In
addition to paralleling most of the current requirements for test
publisher test submissions, proposed Sec. 668.144(d) would also
include the new requirements proposed to be added to the test publisher
submissions. A description of those new provisions follows:
Both test publishers and States would be required to submit a
description of their test administrator certification process that
indicates how the test publisher or State, as applicable, will
determine that a test administrator has the necessary training,
knowledge, skills, and integrity to test students in accordance with
the test publisher's requirements and how the test publisher or the
State will determine that the test administrator has the ability and
facilities to keep its test secure against disclosure or release (see
proposed Sec. 668.144(c)(16) (test publishers) and Sec. 668.144(d)(7)
(States)).
The proposed regulations would require both test publishers and
States to submit a description of the test anomaly analysis they will
conduct. This analysis would need to include a description of how they
will identify potential test irregularities and make a determination
that test irregularities have occurred; an explanation of corrective
action to be taken in the event of test irregularities; and information
on when and how the Secretary, test administrator, and institutions
will be notified if a test administrator is decertified (see proposed
Sec. 668.144(c)(17) (test publishers) and Sec. 668.144(d)(8)
(States)).
Under proposed Sec. 668.144(c)(18) and (d)(9) respectively, both
test publishers and States would be required to describe any accessible
technologies that are available to individuals with disabilities, and
the process for a test administrator to identify and report to the test
publisher when accommodations for individuals with disabilities were
provided.
Reasons: Because many of the requirements for approval of tests,
whether submitted by test publishers or States, are parallel, the non-
Federal negotiators suggested, and the Department agreed, that it would
be appropriate to combine State submission requirements, currently
addressed in Sec. 668.143, and the test publisher submission
requirements, currently addressed in Sec. 668.144 in a single
regulatory provision. For this reason, we combined and, where
appropriate, standardized the language for the submission requirements
for both States and test publishers in proposed Sec. 668.144.
We propose to make a number of changes to the test publisher
submission requirements, reflected in Sec. 668.144(c). First, we
propose to revise Sec. 668.144(c)(8) because we believe it is
important for test publishers to periodically review the content and
specifications of all tests (not only those tests first published five
years before submission) to ensure that they reflect secondary school
level verbal and quantitative skills. In addition, we propose to revise
Sec. 668.144(c)(11)(iv)(B) to require that a test publisher's
technical manual, which must be submitted as part of its test
submission, include evidence demonstrating that the test was normed
using a sample that is representative of the population of persons who
have earned a high school diploma in the United States. We propose this
change because the purpose of this subpart is to implement the
statutory provisions that provide an alternative means for students who
do not have a high school diploma or the equivalent to establish
eligibility for the title IV, HEA programs. To determine the ability of
such students to benefit from a postsecondary education or training
program, passing scores on ATB tests should be based only on the scores
of test takers who have a high school diploma, not the scores of test
takers who are beyond the age of compulsory attendance but who may not
have completed high school.
We also propose to delete the requirements relating to performance-
based tests or tests containing
[[Page 34841]]
performance-based sections, reflected in current Sec. 668.144(c)(14),
because no performance-based tests have ever been submitted to the
Secretary for approval and, therefore, we believe the provision is
unnecessary.
Finally, we are proposing to add three requirements to both the
test publisher and State test submission requirements.
First, we propose to include, in proposed Sec. 668.144(c)(16) and
(d)(7), a requirement that test publishers and States, respectively,
describe their test administrator certification process, including how
they will determine that a test administrator has the necessary
training, knowledge, skills, and integrity to test students. We believe
that it is important for test publishers and States to provide this
information with their test submissions to demonstrate that adequate
screening procedures are used. Throughout the negotiated rulemaking
discussions on the ATB provisions, one of the non-Federal negotiators
voiced the belief that test publishers should be required to determine
the ``integrity'' of the test administrators they certify. Other non-
Federal negotiators questioned how test publishers or States would
evaluate a test administrator's integrity and expressed concern that if
such a requirement were in the regulations, it would be too
prescriptive. We have included in proposed Sec. 668.144(c)(16)(i) and
(d)(7)(i) a requirement that test publishers and States describe how
they will determine that a test administrator has the integrity
necessary to administer tests. The Department does not intend to impose
unnecessary or ill-defined burdens; therefore, we are specifically
soliciting feedback on the proposal to require test publishers and
States to describe how they will determine that test administrators
have integrity, in addition to the training, skills, and knowledge
necessary to administer tests.
Second, we propose to include, in proposed Sec. 668.144(c)(17) and
(d)(8), a requirement that test publishers and States submit a
description of the test anomaly analysis they will conduct and how they
will identify potential test irregularities and make a determination
that test irregularities have occurred. We propose these requirements
to promote some transparency in the screening process that is being
used.
Third, we propose to include, in proposed Sec. 668.144(c)(18) and
(d)(9), a requirement that test publishers and States describe the
types of accommodations available for individuals with disabilities and
the process for identifying and reporting to the test publisher or the
State when accommodations for individuals with disabilities were
provided. This additional information is necessary for scoring and
norming purposes.
Test Approval Procedures (Sec. 668.145)
Current regulations: Current Sec. 668.145 describes both
procedures for the review of tests submitted by test publishers and the
circumstances under which the Secretary's approval may be withdrawn.
Proposed regulations: We propose to revise Sec. 668.145 to extend
the test approval procedures to tests submitted by States. We would
make a number of non-substantive technical changes to this section as
well.
Proposed Sec. 668.145(c)(1) would specify that the approval of a
test begins five years from the date the notice of approval for the
test is published in the Federal Register. Under proposed Sec.
668.145(d)(1), test approval could be revoked if a test publisher or
State violated any terms of the agreement described in Sec. 668.150 or
if the test publisher or State substantially changed the test and did
not resubmit the test, as revised, for approval. Proposed Sec.
668.145(d)(2) would provide that revocation would become effective 120
days from the date the notice of revocation was published in the
Federal Register or an earlier date specified by the Secretary in a
notice published in the Federal Register.
Reasons: Consistent with the changes reflected in proposed Sec.
668.144, we would amend Sec. 668.145 to make the test approval
procedures applicable to States as well as to test publishers, where
appropriate. In proposed Sec. 668.144(c)(1), we would specify that the
approval period, not to exceed five years, would start on the date the
notice of approval is published in the Federal Register. We propose to
provide that the approval period commences on this date, rather than on
the date the Secretary provides written notice to the test publisher of
approval, because the public will be able to determine the effective
date from the notice and that might be relevant information for
institutions.
One of the non-Federal negotiators suggested expanding the reasons
for revocation to include substantially changing a test without
resubmitting it to the Department. The Department agreed. For this
reason, we would add language to proposed Sec. 668.145(d)(1) to
provide that test approval could be revoked if a test publisher or
State substantially changed the test and did not resubmit the test, as
revised, for approval.
Finally, in proposed Sec. 668.145(d)(2), we would provide that a
revocation of test approval would become effective 120 days after the
date the notice of revocation is published in the Federal Register or
an earlier date specified by the Secretary in a notice published in the
Federal Register. We propose this change to ensure that the public has
access to this information.
Criteria for Approving Tests (Sec. 668.146)
Current regulations: Current Sec. 668.146 sets forth the criteria
the Secretary uses to evaluate and approve tests submitted under
subpart J of part 668. Under this provision, in order for a test to be
approved, a test publisher must provide specified information and norm
the test with groups of sufficient size to produce defensible standard
errors of the mean, with groups not composed disproportionately of any
race or gender, and with a contemporary population representative of
persons who are beyond the usual age of compulsory school attendance in
the United States.
Proposed regulations: We propose to revise Sec. 668.146 to provide
that the criteria for approving tests apply to tests submitted by
States as well as test publishers. In addition, we propose to make a
number of small technical and conforming changes to this section.
Finally, in proposed Sec. 668.146(c)(4)(ii), we require that States
and test publishers norm their tests with a contemporary sample that is
representative of the population of persons who have earned a high
school diploma in the United States.
Reasons: Consistent with the changes we propose to make to Sec.
668.144, we propose to amend Sec. 668.145 to ensure that the criteria
for approving tests apply to States as well as to test publishers,
where appropriate.
We propose to amend Sec. 668.146(c)(4)(ii) to ensure that tests
are being normed with a contemporary sample of persons who have earned
a high school diploma in the United States, rather than persons who are
beyond the usual age of compulsory school attendance in the United
States. The purpose of this subpart is to implement the statutory
provisions that provide an alternative means for students who do not
have a high school diploma or the equivalent to establish eligibility
for the title IV, HEA programs. Therefore, to determine the ability of
such students to benefit from a postsecondary education or training
program, pass scores should be based only on the scores of test takers
who have a high school diploma, not the scores of test takers who are
beyond the age of compulsory attendance but who may not have completed
high school.
[[Page 34842]]
Passing Scores (Sec. 668.147)
Current regulations: Under current Sec. 668.147, the Secretary
specifies that the passing score on each approved test is one standard
deviation below the mean for students with high school diplomas who
have taken the test within three years before the test was submitted
for approval.
Proposed regulations: Proposed Sec. 668.147 would specify that
passing scores are based on the mean score of a sample of individuals
who have taken the test during the three years before it was submitted.
The sample would need to be representative of the population of high
school graduates in the United States.
Reasons: The proposed changes to Sec. 668.147 would specify that
the passing score is based on the mean score of a sample of high school
graduates who have taken the test. This change would make it clear that
a sample of test takers would be used, and that the test takers whose
scores are used need not be students.
Additional Criteria for the Approval of Certain Tests (Sec. 668.148)
Current regulations: Current Sec. 668.148 specifies additional
criteria for approval of tests that are performance-based, developed
for non-native speakers of English, modified for use for persons with
disabilities, and computer-based.
Proposed regulations: Proposed Sec. 668.148 would largely track
current Sec. 668.148. In addition to making technical updates and
conforming changes (e.g., updating references to documents incorporated
by reference and updating defined terms to use those terms proposed in
this document), we propose to remove the criteria for approval of
performance-based tests, reflected in current Sec. 668.148(a)(1). We
also propose to revise the regulatory provision relating to tests
developed for non-native speakers of English who are enrolled in a
program that is taught in their native language to provide that if the
test is in a language other than Spanish, it must be accompanied by a
recommendation for a provisional passing score based upon performance
of a sample of test takers representative of non-English speaking
individuals who speak a language other than Spanish and who have a high
school diploma. The sample upon which the recommended provisional
passing score would be based would need to be large enough to produce
stable norms. In addition, we would provide, in proposed Sec.
668.148(b)(2), that the recommended passing scores for tests designed
solely to measure the English language competence of non-native
speakers of English would need to be based on the mean score of test
takers beyond the age of compulsory school attendance who completed
(rather than entered) specified programs.
Reasons: We propose to remove the regulatory provision related to
performance-based tests because, as mentioned earlier in this preamble
discussion, no performance-based tests have ever been submitted to the
Secretary for approval.
The change proposed in the regulatory provision relating to tests
developed for non-native speakers of English who are enrolled in a
program that is taught in their native language (other than Spanish) is
intended to provide that the provisional passing scores are based on a
sample of test takers whose native language is not Spanish and who have
a high school diploma. This is parallel to the proposed change in Sec.
668.144(c)(11)(iv)(B).
Finally, the change reflected in proposed Sec. 668.148(b)(2),
which would require basing recommendations for passing scores for tests
to measure English language competence on scores of test takers that
have completed, rather than entered, specified educational and training
programs, is designed to be consistent with changes throughout these
proposed regulations. The Department specifically seeks input on the
possible impact of this change due to the potential for unintended
consequences.
Special Provisions for the Approval of Assessment Procedures for
Individuals With Disabilities (Sec. 668.149)
Current regulations: Current Sec. 668.149 (Special provisions for
the approval of assessment procedures for special populations for whom
no tests are reasonably available) describes the special procedures
that apply when testing persons with disabilities and students whose
native language is not English and who are not fluent in English under
subpart J of part 668.
Proposed regulations: We propose to restructure Sec. 668.149 to
focus only on the special provisions for the approval of assessment
procedures for individuals with disabilities. We would remove current
Sec. 668.149(b), which describes the procedures for automatic test
approval for tests provided in a student's native language for students
whose native language is not English.
Reasons: We propose to revise Sec. 668.149 to make clear the
respective responsibilities of test publishers (or States, where
appropriate) and test administrators when using special assessment
procedures for individuals with disabilities.
We expect test administrators who administer tests under this
section to ensure there is documentation of the test-taker's need for a
modified test and to comply with the provisions of Sec. 668.149(c)(2).
We would encourage a test administrator to coordinate with the
institution's disability support services center, or other
institutional or State staff who have knowledge of an individual's need
for a modified test to ensure that an appropriate test is given.
We propose to remove the regulatory language concerning the use of
foreign language tests, because historically there have been no
submissions of foreign language tests for approval. Moreover, pursuant
to the current regulations, because there are no currently approved
foreign language tests, any foreign language test that has not been
rejected by the Secretary is considered automatically to be approved
even if it has not been submitted to the Secretary for approval. Under
the current regulatory framework, therefore, test publishers and States
lack an incentive to submit tests in foreign languages for the
Secretary's approval. Continuing under the current regulations in Sec.
668.149(b) would allow test publishers and States to circumvent the ATB
test approval process; therefore, we propose its removal. With the
removal of ``Students whose native language is not English'' from Sec.
668.149(b), foreign language tests would be required to be submitted
through the established test approval procedures in Sec. Sec. 668.145
and 668.148.
During the negotiated rulemaking discussions, some of the non-
Federal negotiators thought it might be advisable to have a transition
period before removing the special provisions in current Sec.
668.149(b). In light of this suggestion, the Department is soliciting
comments on whether a transition period is necessary and, if one is
necessary, how long should it be.
Agreement Between the Secretary and a Test Publisher or a State (Sec.
668.150)
Current regulations: The current regulations require test
publishers to enter into an agreement with the Secretary before an
institution may use the test publisher's test to determine a student's
eligibility for title IV, HEA program funds. Current Sec. 668.150(b)
describes the specific provisions that must be included in the
agreement. Current Sec. 668.150(c) contains the regulations governing
the Secretary's termination of an agreement.
Proposed regulations: Proposed Sec. 668.150 would provide that
States, as
[[Page 34843]]
well as test publishers, must enter into agreements with the Secretary
in order to have their tests approved.
We would also revise this section to require both test publishers
and States to comply with a number of new requirements that would be
added to the agreement with the Secretary. These requirements would
include:
Requiring the test administrators that they certify to
provide them with certain information about whether they have been
decertified (see proposed Sec. 668.150(b)(2)).
Certifying only test administrators who have not been
decertified within the last three years (see proposed Sec.
668.150(b)(3)(iii)).
Re-evaluating the qualifications of a test administrator
who has been decertified by another test publisher or State (see
proposed Sec. 668.150(b)(5)).
Immediately notifying the test administrator, the
Secretary, and institutions when the test administrator is decertified
(see proposed Sec. 668.150(b)(6)).
Reviewing test results of tests administered by a
decertified test administrator and immediately notifying affected
institutions and students (see proposed Sec. 668.150(b)(7)).
Providing copies of test anomaly analysis every 18 months
instead of every 3 years (see proposed Sec. 668.150(b)(13)).
Providing access to test records or other documents
related to an audit, investigation, or program review of an
institution, the test publisher, or a test administrator (see proposed
Sec. 668.150(b)(14)).
Reporting to the Secretary any credible information
indicating that a test has been compromised (see proposed Sec.
668.150(b)(15)).
Reporting to the Office of Inspector General of the
Department of Education any credible information indicating that a test
administrator or institution may have engaged in fraud or other
criminal misconduct (see proposed Sec. 668.150(b)(16)).
Requiring a test administrator who provides a test to an
individual with a disability who requires an accommodation in the
test's administration to report to the test publisher or the State the
nature of the disability and the accommodations that were provided (see
proposed Sec. 668.150(b)(17)).
Reasons: Many of the requirements we propose to add to the required
provisions in agreements between the Secretary and test publishers
(and, under the proposed regulations, States) are based on
recommendations the Department received from the Government
Accountability Office (GAO). GAO issued a report in August 2009 that
cited the Department for weak oversight of the ATB test requirements;
in its report, GAO provided recommendations to the Department to
strengthen controls over the ATB testing process and to amend the ATB
regulations. Specifically, the GAO identified the following problems
with the current regulations:
Current regulations require test publishers to conduct
test score analyses only every three years. This means it is possible
for test administrators who are administering tests improperly to go
undetected for up to three years.
While the current regulations require that test publishers
decertify test administrators who fail to administer tests properly,
they do not require test publishers to report to the Department on
implementation of their decertification process.
Current regulations do not specifically require test
publishers to follow up on test score irregularities or report any
corrective actions to the Department. Therefore, the Department has no
way of knowing whether actual violations occurred or how the test
publishers dealt with any violations they identified.
In response to the first problem identified by GAO, we propose to
require, in proposed Sec. 668.150(b)(13), that test publishers conduct
test score analyses every 18 months, instead of every 3 years. This
change would reduce the possibility that test administrators who are
administering tests improperly would go undetected. The Department
initially proposed that test anomaly analysis be submitted 18 months
after test approval, then annually thereafter. However, after hearing
the discussion of the benefits and drawbacks of more frequent analysis,
the Department agrees that receiving test score analyses every 18
months after approval would address its concerns.
The second problem identified by GAO was that current regulations
do not require test publishers to report to the Department on
implementation of their decertification process. The Department seeks
to address this problem in proposed Sec. 668.150(b)(6), which would
require test publishers and States to immediately notify the test
administrator, the Secretary, and the institutions where the test
administrator previously administered approved tests, when the test
publisher or the State decertifies a test administrator.
The decertification of test administrators and the draft regulatory
language the Department offered to address this problem generated a
considerable amount of discussion during the negotiated rulemaking
sessions. The Department initially proposed draft regulatory language
that would require test publishers and States to review the tests
results of the tests administered by a decertified test administrator
and determine which tests were invalid. During the discussion at
negotiated rulemaking, it became clear that the focus of the proposed
regulations should be on a determination of whether the tests were
administered improperly, rather than on a determination of whether the
tests were invalid. For this reason, proposed Sec. 668.150(b)(7)(i)
would require test publishers and States to review the test results of
tests administered by decertified test administrators to determine
which tests may have been administered improperly. Proposed Sec.
668.150(b)(7)(ii) would require that test publishers and States
immediately notify the affected institutions and students when they
determine that tests were improperly administered. The Department is
committed to providing guidance to test publishers, States, and
institutions regarding how to handle situations where tests have been
determined to be improperly administered and to working with the test
publishers and the States on notification letters to institutions and
students.
Some non-Federal negotiators said it was important for all students
who had been given an ATB test by a decertified test administrator to
be notified. Other non-Federal negotiators believed this was not
necessary. The Department solicits comments on whether notification to
all potentially affected institutions, students, or prospective
students should take place when a test administrator is decertified,
regardless of whether there has been a determination that the tests
given to those students or prospective students were improperly
administered.
Some non-Federal negotiators expressed the opinion that once a test
administrator was decertified, he or she should not be able to be
recertified, and that the Department should keep a list of decertified
test administrators. The discussion of this topic at negotiated
rulemaking caused the Department to examine options for the appropriate
length of time for decertification, the impact of a decertification by
one test publisher or State on the certification of that test
administrator by other test publishers or States, and the extent of
notifications.
[[Page 34844]]
The Department's position is that the decertification process
should not be any more complicated than necessary. As there is no
provision for a third party to appeal a decertification, we do not
believe it is appropriate for a test administrator who is decertified
by one test publisher to be decertified forever--without the ability to
be certified by any test publisher again.
Therefore, we propose a number of regulatory changes to ensure that
States and test publishers have rigorous certification and
decertification processes. Specifically, we would require, at the front
end of the certification process, that a test publisher (or State)
obtain a statement from potential test administrators indicating that
they are not currently decertified and agreeing that they will notify
the test publisher or State if they become decertified by another
entity (see proposed Sec. 668.150(b)(2)). We would then provide, under
proposed Sec. 668.150(b)(3)(iii), that a decertified test
administrator would not be able to get a new certification again until
three years after his or her decertification. We believe that these
provisions would address the potential problem of having a decertified
test administrator obtain certification from another test publisher and
getting certified.
In the case of a test administrator who has been certified by more
than one test publisher (or State) but then is decertified by one test
publisher (or State), we would not require the immediate and automatic
decertification of the test administrator by other test publishers (or
States). Instead, as reflected in proposed Sec. 668.150(b)(5), we
would require that other test publishers re-evaluate the qualifications
of the test administrator to determine whether it is appropriate to
continue the test administrator's certification.
The Department is proposing this approach to avoid the problem of
one entity's actions having an inappropriate negative impact on another
entity. It is conceivable that the cause for decertification by one
test publisher or State would be unlikely to arise at a different test
publisher or State because of different procedures. Also, in the
context of test publishers, this approach would avoid the potential for
one test publisher being able to affect the services of a competitor.
The third problem identified by GAO (i.e., the fact that the
current regulations do not require any follow-up on test score
irregularities or corrective action) is addressed by a number of
proposed provisions. In addition to proposed Sec. 668.150(b)(7), which
we discussed earlier, Sec. 668.150(b)(15) would require that a test
publisher or State immediately report to the Secretary any credible
information indicating that a test has been compromised. Proposed
paragraph (b)(16) of Sec. 668.150 would require that test publishers
and States immediately report to the Department's Office of Inspector
General any credible information indicating that a test administrator
or institution may have engaged in fraud or other criminal misconduct.
Finally, in proposed Sec. 668.150(b)(17), we would require that
test administrators notify test publishers (and States) if they provide
any accommodations to individuals with disabilities. We believe that
adding this requirement is appropriate because it would allow test
publishers and States to take this information into account when
norming tests in the future.
Administration of Tests (Sec. 668.151)
Current regulations: Current Sec. 668.151 requires institutions to
select a test administrator to give approved tests and to use results
from an approved test publisher or assessment center. This provision
also describes the conditions under which a test is considered to be
independently administered.
Proposed regulations: Proposed Sec. 668.151(a) would largely
mirror the language in current Sec. 668.151(a), except that, in
paragraph (a)(1), we would remove the reference to tests approved under
Sec. 668.143 and we would refer to ``test administrator'', rather than
``certified test administrator.'' As discussed elsewhere in this
preamble, we have moved much of the language from current Sec.
668.151(b) to the definition of the term independent test administrator
in proposed Sec. 668.142. As revised, proposed Sec. 668.151(b)(1)
would retain the current provision that the Secretary considers a test
to be independently administered if it is given at an assessment center
by a test administrator who is an employee of the center. In proposed
Sec. 668.151(b)(2), we would add language to provide that the
Secretary also considers a test to be independently administered if it
is given by an independent test administrator (defined in Sec.
668.142) who maintains tests at a secure location and submits the test
for scoring by the test publisher or the State or, for a computer-based
test, a record of the test scores, within two business days of
administering the test.
Proposed Sec. 668.151(c) and (d) would largely track current Sec.
668.151(c) and (d) except that we would update these paragraphs so that
they would apply to both States and test publishers. In addition, we
would revise proposed Sec. 668.151(d)(3) to ensure that it is
consistent with the changes reflected in proposed Sec. 668.151(b)(2)
and Sec. 668.152(b)(2). We are proposing to remove Sec. 668.152(d)(6)
because the requirement is covered in proposed Sec. 668.150(b)(14).
Finally, in proposed Sec. 668.151(g)(4), we would require
institutions to keep a record of each individual who took an ATB test
and the name and address of the test administrator who administered the
test and any identifier assigned to the test administrator by the test
publisher or the State. If the individual who took the test has a
disability and is unable to be evaluated by the use of an approved ATB
test, or requested or required a testing accommodation, the institution
would be required, under proposed Sec. 668.151(g)(5), to maintain
documentation of the individual's disability and of the testing
arrangements provided.
We would also make minor technical and conforming changes
throughout this section.
Reasons: The minor changes reflected in proposed Sec. 668.151(a)
would be made to make the provision consistent with other changes in
the proposed regulations. Specifically, we remove the reference to
Sec. 668.143 because we are not including that provision in the
proposed regulations, and we refer to ``test administrator'' because,
by definition, a test administrator must be certified (see proposed
definition of test administrator in Sec. 668.142).
In proposed Sec. 668.151(b)(2), we would add a requirement to
address the need to maintain tests in a secure location. This topic
generated a great deal of discussion during the negotiated rulemaking
sessions. After the second negotiated rulemaking session, the
Department proposed draft language that would have required test
publishers to maintain tests at a secure location, somewhere other than
at the institution at which the tests are being administered.
Those non-Federal negotiators who had expressed the belief that
tests should not be kept at an institution, unless the institution had
an assessment center, were supportive of this proposal. Some of the
other non-Federal negotiators identified a number of potential problems
with this proposal. For example, they explained that it is common
practice for test publishers to ship cartons of tests to the
institutions where the tests will be administered, whether the tests
are being administered at a test assessment center or by an independent
test administrator. In addition, we were informed that many, if not
most tests approved for ATB are
[[Page 34845]]
used for placement and other purposes and not used solely for the
determination of individuals' eligibility for title IV, HEA programs.
Some non-Federal negotiators noted that, in fact, it is also possible
that tests may be far more secure if they are located at an institution
where the facilities are monitored. Independent test administrators may
not have access to secure locations apart from the institutions at
which they give tests. For this reason, some non-Federal negotiators
urged the Department not to require that tests be maintained in a
secure location other than the institution at which they would be
administered.
The language in proposed Sec. 668.151(b)(2) is consistent with the
Department's position that all ATB tests must be kept at a secure
location. However, we also understand that if some of the tests are
used for multiple purposes, it is difficult to prohibit the delivery of
these tests to an institution. Therefore, the Department is
specifically soliciting comments regarding proposed Sec. 668.151(b)(2)
and on other ways the Department can ensure that tests can be kept
secure. Specifically, what does it mean to keep tests at a secure
location? Does it mean a locked facility to which only the test
administrator has a key? Should the focus be on maintaining a chain of
custody, with adequate safeguards, rather than on the location itself?
Is there a way to maintain inventory that would address the test
security issue? As test publishers have a vested interest in keeping
their tests secure, the Department is particularly interested in
recommendations regarding how best to address the security issue in
regulations.
With regard to the changes reflected in proposed Sec. 668.151(g),
we would be adding to the information that an institution must record.
The added information that the institution would be required to
maintain for each individual who took an ATB test would include: (1)
the name and address of the test administrator who administered the
test and any identifier assigned to the test administrator by the test
publisher or the State; and (2) if the individual who took the test has
a disability and is unable to be evaluated by the use of an approved
ATB test or the individual requested or required a testing
accommodation, documentation of the individual's disability and of the
testing arrangements that is provided in accordance with Sec.
668.153(b). This proposed provision is intended to encompass
documentation of accommodations provided through the use of accessible
technologies, as described in Sec. 668.144(c)(18) and(d)(9), as well
as other accommodations requested or required by the individual with a
disability in accordance with Sec. 668.153(b). Requiring the name,
address and any assigned identifier for each test administered would
enable the test publisher or State to identify all tests administered
by a test administrator and facilitate the notification of test takers
should the test publisher or the State determine that the test was
improperly administered. Requiring documentation of disabilities that
necessitate testing accommodation, and of the testing arrangements
provided, would provide important information for two reasons. First,
collection of the information would help emphasize that testing
accommodations may be provided only to individuals with documentation
of a disability who require testing accommodations. We would encourage
test administrators to work with an institution's disability support
services center, or other institutional or State staff who have
knowledge and experience in providing appropriate testing
accommodations to individuals with disabilities to ensure that
appropriate testing accommodations are provided and are appropriately
documented. Second, providing such information to the test publisher or
State would let those entities know that testing accommodations were
provided, so that entity can make a determination regarding whether to
include the score with scores of other test takers, for whom no testing
accommodations were provided, for evaluative or norming purposes in the
future.
Administration of Tests by Assessment Centers (Sec. 668.152)
Current regulations: Under current Sec. 668.152(a), assessment
centers are required to follow the requirements for administering tests
specified in Sec. 668.151(d). If the assessment center scores tests,
it must send copies of completed tests, or a report listing all test-
takers' scores, to the test publisher on an annual basis (see current
Sec. 668.152(b)).
Proposed regulations: Proposed Sec. 668.152(a) would clarify that
assessment centers are also required to comply with the provisions of
Sec. 688.153 (Administration of tests for individuals whose native
language is not English or for individuals with disabilities), if
applicable.
Under proposed Sec. 668.152(b)(2), assessment centers that score
tests would be required to provide copies of completed tests or lists
of test-takers' scores to the test publisher or the State, as
applicable, on a weekly basis. Under proposed Sec. 668.152(b)(2)(i)
and (b)(2)(ii), copies of completed tests or reports listing test-
takers' scores would be required to include the name and address of the
test administrator who administered the test and any identifier
assigned to the test administrator by the test publisher or the State.
Reasons: In proposed Sec. 668.152(a), we would clarify that
assessment centers are also required to comply with the provisions of
Sec. 668.153. With respect to individuals whose native language is not
English, the test assessment center would be required to use the
appropriate test, depending on the type of program in which an
individual plans to enroll, and whether the classes are conducted in
English or in the individual's native language. With respect to
individuals with disabilities, the assessment center would be required
to maintain documentation of an individual's disability, and would be
required to ensure that there is documentation that an individual with
a disability requires accommodations, such as extra time or a quiet
room, for taking an approved test. Under current regulations, the
presumption is that assessment centers comply with the provisions of
Sec. 668.153, but the proposed regulations would make the requirement
explicit so there is no misunderstanding.
In proposed Sec. 668.152(b)(2), we would require assessment
centers that score tests to provide on a weekly basis (rather than an
annual basis) the test publisher, or the State, as applicable, with all
copies of the completed tests and a report listing, among other things,
all test-takers' scores and institutions to which the scores were sent.
We would also revise this section to require assessment centers to
record the name and address of the test administrator who administered
the test and any identifier assigned to the test administrator by the
test publisher and to maintain this information in the copies of the
completed tests or a report listing all test-takers' scores and
institutions to which the scores were sent. These changes would enable
the test publisher or State to identify all tests administered by a
test administrator and to facilitate the notification of test takers
should the test publisher or the State determine that the test was
improperly administered.
We also propose minor technical and conforming changes throughout
this section.
[[Page 34846]]
Administration of Tests for Individuals Whose Native Language Is Not
English or for Individuals With Disabilities (Sec. 668.153)
Current regulations: Current Sec. 668.153 describes the
requirements governing the administration of tests for students whose
native language is not English or for persons with disabilities.
Current Sec. 668.153(a) specifies the requirements that apply to
the tests that must be used for students whose native language is not
English and those requirements differ depending on whether the student
is enrolled in (1) a program conducted entirely in his or her native
language, (2) a program that is taught in English with an English as a
Second Language (ESL) component; or (3) a program that is taught in
English without an ESL component, or the student does not enroll in the
ESL component if the institution offers such a component.
Current Sec. 668.153(b) specifies the requirements that apply to
the tests that must be used for students with a documented impairment.
Under this provision, an institution must use a test described in Sec.
668.148(a)(3) or Sec. 668.149(a) for students with a documented
impairment. The institution must document that a student is disabled
and unable to be evaluated by the use of a conventional test.
Proposed regulations: In addition to reflecting a number of
technical and conforming changes, proposed Sec. 668.153 would clarify
that this section applies to individuals whose native language is not
English or individuals with disabilities who are enrolled or who plan
to enroll at an institution (i.e., not only students).
Proposed Sec. 668.153(a)(1) and (a)(3) would remain largely
unchanged from the current regulations. Under proposed Sec.
668.153(a)(2), an individual whose native language is not English who
is enrolled or plans to enroll in a program taught in English with an
ESL component would now be required to take an English language
proficiency assessment approved under Sec. 668.148(b) and, before
beginning the portion of the program taught in English, a test approved
under Sec. 668.146.
Proposed Sec. 668.153(b) would be revised by removing references
to an individual's impairment and, in its place, using the term
individual with a disability, which would be defined in proposed Sec.
668.142. The substantive changes reflected in paragraph (b) of proposed
Sec. 668.153 relate to the documentation necessary to support the
determination that an individual has a disability and requires
accommodations for taking an approved test. If an individual with a
disability requires accommodations--such as extra time or a quiet
room--for taking an approved test, or is unable to be evaluated by the
use of an approved ATB test, the test administrator would be required
to ensure that there is documentation to support the alternative
arrangements. Proposed Sec. 668.153(b)(4), which lists potential
sources of such documentation, would be expanded to include a record of
the disability from a local or State educational agency, or other
government agency, such as the Social Security Administration or a
vocational rehabilitation agency that identifies the disability and may
include a diagnosis as well as recommended testing accommodations.
Reasons: We propose to refer to ``individuals who are enrolled, or
who plan to enroll'', instead of ``students who are enrolled'',
throughout this section because it is common for individuals to take
ATB tests prior to enrollment.
We propose to make the changes reflected in proposed Sec.
668.153(a)(2) to address a problem with the current regulations, which
require non-native English speakers who enroll in a program that is
taught in English and that has an ESL component to take either an ESL
test or an ATB test in the student's native language. Testing such an
individual in his or her native language does not demonstrate that the
individual has the ability to benefit from a program taught in English.
Rather, for these individuals, it is necessary first to determine how
proficient they are in English. Therefore, proposed Sec. 668.153(a)(2)
would require individuals who wish to enroll in such a program to first
take an English language proficiency assessment to determine
appropriate placement in the ESL component. Before such students could
begin a program taught in English, they would be required to take a
regular ATB test in English.
Finally, we would revise Sec. 668.153(b)(3) to require that test
administrators ensure that there is adequate documentation to support
determinations that a test-taker is an individual with a disability and
requires accommodations for taking an approved test or is unable to be
evaluated by the use of an approved ATB test. The examples of
documentation that would be added to Sec. 668.153(b)(4) are provided
to assist institutions in understanding what kinds of documentation are
appropriate for supporting a determination that an individual has a
disability and requires accommodations for taking an approved test.
Institutional Accountability (Sec. 668.154)
Current regulations: Current Sec. 668.154 limits institutional
liability for title IV, HEA program funds disbursed to a student whose
eligibility is determined under subpart J of part 668 only if the
institution used a test administrator who: (1) was not independent of
the institution at the time the test was given, (2) compromised the
testing process, or (3) was unable to demonstrate that the student
received a passing score on an approved test.
Proposed regulations: Proposed Sec. 668.154 would largely track
current Sec. 668.154, except that it would provide for institutional
liability if institutions used a test that was not administered
independently in accordance with Sec. 668.151(b). In addition, in
proposed Sec. 668.154(b), we would clarify that an institution would
be liable if it or an employee of the institution compromised the test
in any way.
Reasons: We propose to amend Sec. 668.154(a) to provide that an
institution would be liable if the institution used a test that was not
administered independently, in accordance with Sec. 668.151(b). In
making this change, we would clarify that ATB tests must be
administered independently, whether in an assessment center or by an
independent test administrator in order to preserve the integrity of
the testing process.
In addition, we propose to provide that an institution would be
held responsible if either the institution or an employee of the
institution compromises the testing process to promote accountability.
Transitional Rule for the 1996-97 Award Year (Sec. 668.155)
Current regulations: Current Sec. 668.155 contains a transitional
rule for the 1996-97 award year.
Proposed regulations: The proposed regulations would remove current
Sec. 668.155 and reserve that section for future use.
Reason: We propose to remove the transitional rule for 1996-97
because it is outdated.
Approved State Process (Sec. 668.156)
Current regulations: Current Sec. 668.156 provides the
requirements for the Department's approval of a State process that
serves as an alternative to the requirement for passage of a test
approved under subpart J of part 668.
Proposed regulations: Proposed Sec. 668.156 would remain largely
unchanged from current Sec. 668.156. The one change, in proposed Sec.
668.156(e), would specify that an approved State
[[Page 34847]]
process would become effective on the date the Secretary approves the
process or six months after the State submits the process for approval
if the Secretary neither approves nor disapproves the process.
Reason: The change clarifies that the effective date of a State
process is the date the process has been deemed to be approved. We made
this change to clarify what the effective date of a process is when the
Secretary affirmatively approves it.
Disbursements (Sec. Sec. 668.164(i), 685.102(b), 685.301(e), 686.2(b),
and 686.37(b))
Provisions for Books and Supplies
Statute: Section 401(e) of the HEA provides that an institution may
credit a student's account with Federal Pell Grant funds to pay for the
cost of tuition and fees, and for institutionally owned housing, room,
and board. For other goods and services provided by the institution,
the student may elect to have his or her account credited with Federal
Pell Grant funds to pay those costs. In all other respects, section
401(e) provides that payments of Federal Pell Grant funds are made in
accordance with regulations promulgated by the Secretary. The HEA does
not address the issue of crediting student accounts for the other title
IV, HEA programs.
Current regulations: Section 668.164(b) provides that an
institution must disburse title IV, HEA program funds (except for FWS
funds) on a payment period basis. Section 668.164(d) reflects the
statutory requirements for crediting a student's account with Federal
Pell Grant funds, but provides that those requirements also apply to
ACG, National SMART Grant, TEACH Grant, FSEOG, Federal Perkins Loan,
Direct Loan, and FFEL program funds. In addition, Sec. Sec. 686.33(a),
690.76(a), and 691.76(a), provide that for each payment period, an
institution may pay Federal Pell Grants, ACGs, National SMART Grants,
and TEACH Grants to a student in a time and manner that best meets the
student's needs.
Proposed regulations: Under proposed Sec. 668.164(i), an
institution would provide a way for a Federal Pell Grant eligible
student to obtain or purchase required books and supplies by the
seventh day of a payment period under certain conditions. An
institution would have to comply with this requirement only if, 10 days
before the beginning of the payment period, the institution could
disburse the title IV, HEA program funds for which the student is
eligible, and presuming that those funds were disbursed, the student
would have a credit balance under Sec. 668.164(e). The amount the
institution would provide to the student for books and supplies would
be the lesser of the presumed credit balance or the amount needed by
the student, as determined by the institution. In determining the
amount needed by the student, the institution may use the actual costs
of books and supplies or the allowance for books and supplies used in
the student's cost of attendance for the payment period.
Reasons: Although the current regulations permit institutions to
disburse Federal Pell Grant and other title IV, HEA program funds in a
manner that best meets the needs of students, we have identified
situations where low-cost institutions delay disbursing funds for an
extended time, or make partial disbursements to cover costs for only
tuition and fees. As a result of these practices, students either have
to pay for books and supplies that would otherwise be paid by title IV,
HEA program funds by obtaining loans, or do without the books and
supplies needed at the beginning of the term or enrollment period until
the institution makes the funds available. The proposed regulations
would reduce these disbursement delays at some institutions and enable
students to obtain their books and supplies in a timely manner.
During the negotiated rulemaking sessions, some of the non-Federal
negotiators stated that many institutions advance funds (institutional
funds or title IV, HEA program funds) or issue vouchers, or other
credit vehicles, that students use to obtain books and supplies. The
negotiators noted that if a student to whom the institution provided
the advance or voucher does not begin classes, the institution risks
losing the amount advanced. For example, if the institution advanced
Federal Pell Grant funds to a student, e.g., made a disbursement
directly to the student, and the institution could not show that the
student began attendance in the payment period, under Sec.
668.21(a)(1) the institution would be liable and would have to return
those funds. For this reason, some of the non-Federal negotiators
argued that in exchange for requiring an institution to advance funds
or issue vouchers early in the payment period, and before the
institution could establish that the student began attendance, the
student should be liable under Sec. 668.21 for returning the funds.
In response to these concerns and suggestions, the Department put
forward draft proposed regulations shifting the liability to students,
but that draft was rejected by other non-Federal negotiators for two
reasons. First, these negotiators believed that a student should not be
responsible for repaying a debt under the title IV, HEA programs
because a student could be precluded from enrolling again at a
postsecondary institution if the student did not repay the debt or make
satisfactory arrangements to repay it. Second, some of the non-Federal
negotiators were aware of predatory practices at some institutions
where students were promised an advance of funds simply for enrolling
in programs at those institutions, and these negotiators believed that
shifting the liability to students would exacerbate these practices.
Some of the non-Federal negotiators noted that some public
institutions must request funds from a State office (unlike other
institutions that have direct control of funds) and cautioned against
adopting any regulations that would make it administratively difficult,
if not impossible, for these institutions to comply with disbursement
timelines. These non-Federal negotiators suggested that an advance or
voucher for books and supplies could be issued early in the payment
period only if the institution determined that the student was eligible
and otherwise qualified for title IV, HEA program funds before the
beginning of the payment period, and this suggestion is reflected in
the proposed regulation.
The committee agreed to adopt proposed Sec. 668.164(i), believing
it provided an appropriate balance between the need for students to be
able to purchase or obtain books and supplies early in the payment
period and the administrative needs of institutions.
Reporting Disbursements, Adjustments, and Cancellations
Statute: None.
Current regulations: Sections 685.301(e) and 686.37(a) require an
institution to submit a record to the Department for the initial
disbursement of a Direct Loan or TEACH Grant no later than 30 days
following the date of that disbursement. In addition, an institution
must submit subsequent records for disbursements, adjustments, and
cancellations of these program funds no later than 30 days following
the date of those actions. However, Sec. 690.83(a)(2) of the Federal
Pell Grant regulations provides that an institution submits Payment
Data in accordance with procedures established by the
[[Page 34848]]
Secretary through publication in the Federal Register.
Proposed regulations: The proposed regulations in Sec. Sec.
685.301(e) and 686.37(b) would adopt the current Federal Pell Grant
reporting requirements. Also, the definition of the term ``Payment
Data'' would be added to the Direct Loan and TEACH Grant program
regulations in Sec. Sec. 685.102(b) and 686.2(b), respectively.
Reasons: The proposed regulations would harmonize the reporting
requirements for the Federal Pell Grant, TEACH Grant, and Direct Loan
programs and provide flexibility to the Secretary to modify the
requirements to take advantage of changing technology and improved
business processes.
Executive Order 12866
Regulatory Impact Analysis
Under Executive Order 12866, the Secretary must determine whether
the regulatory action is ``significant'' and therefore subject to the
requirements of the Executive Order and subject to review by the OMB.
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action likely to result in a rule that may
(1) have an annual effect on the economy of $100 million or more, or
adversely affect a sector of the economy, productivity, competition,
jobs, the environment, public health or safety, or State, local or
tribal governments or communities in a material way (also referred to
as an ``economically significant'' rule); (2) create serious
inconsistency or otherwise interfere with an action taken or planned by
another agency; (3) materially alter the budgetary impacts of
entitlement grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raise novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive order.
Pursuant to the terms of the Executive order, we have determined
this proposed regulatory action will have an annual effect on the
economy of more than $100 million. Therefore, this action is
``economically significant'' and subject to OMB review under section
3(f)(1) of Executive Order 12866. Notwithstanding this determination,
we have assessed the potential costs and benefits--both quantitative
and qualitative--of this regulatory action and have determined that the
benefits justify the costs.
Need for Federal Regulatory Action
These proposed regulations are needed to implement provisions of
the HEA, as amended by the HEOA, particularly related to programs that
prepare students for gainful employment, incentive compensation,
satisfactory academic progress policies, and verification of
information on student aid applications which require the development
of new or revised policies and disclosures for institutions
participating in Federal student assistance programs. These regulations
also would implement changes made by the HEOA to provisions related to
ability to benefit options.
Many regulatory provisions were included in this NPRM because of
the length of time since they had been updated or the provisions'
relationship to significant developments, such as the Department's
FAFSA simplification initiative. In the following areas, the Secretary
has exercised limited discretion in including topics in these proposed
regulations:
Definition of High School Diploma (Sec. 668.16(p)): The proposed
regulations would require institutions to demonstrate the capability to
adequately administer the program by developing and following
procedures to evaluate the validity of a student's high school
completion. A high school diploma is an essential factor in determining
an institution's participation in or a student's eligibility for
assistance under the title IV, HEA programs, but the term is not
defined anywhere in the HEA or its implementing regulations. Under
proposed Sec. 668.16(p), institutions would have to verify a student's
high school completion if the institution or the Secretary has reason
to believe a student's diploma is not valid or is not from an entity
that provides secondary school education. This proposed provision is
not intended to create a requirement to collect high school diplomas
from all students. Rather, it allows operational flexibility so
institutions can choose the best approach to make inquiries when
warranted. To assist in this process, the Department is working to
implement changes in the FAFSA. Specifically, beginning in 2011-2012,
students will be required to list the name of their secondary school
and the State that issued their diploma when completing their FAFSA. In
addition, the Department plans to issue guidance to institutions on
developing and following procedures for evaluating the validity of high
school diplomas through the Federal Student Aid Handbook or other
means.
Ability to Benefit (Sec. Sec. 668.32 and 668.141 through 668.156):
Students without a high school diploma or its equivalent may become
eligible for title IV, HEA program funds if they can prove their
ability to benefit from the planned education by taking Department-
approved ability to benefit tests or completing college coursework. The
current regulations specify the criteria and procedures for approval of
ATB tests, the requirements for independent administration of approved
tests, the requirements for maintaining the Secretary's approval of ATB
tests, and the procedures for the Secretary's approval of alternate
State processes.
As discussed in the ability to benefit section of this NPRM, the
proposed regulations would update the procedures and requirements
related to the administration and suitability of ability to benefit
tests to ensure the security of the test, perform an analysis of test
irregularities, take corrective action when test irregularities occur,
report the names of decertified test administrators to the Secretary,
and to handle testing of non-native speakers of English and individuals
with disabilities. Several defined terms would be modified or added to
clarify the regulations, including the terms assessment center,
independent test administrator, test, test administrator, and test
publisher.
The proposed regulations related to application for test approval
would consolidate requirements for test publishers and States
submitting tests for approval because the processes have common
elements. Under the proposed regulations, test publishers and States
would be required to show that their tests are normed using a
contemporary sample that is representative of people with a high school
diploma instead of people beyond the age of compulsory school
attendance. They would be required to submit a description of their
test administrator certification process that indicates how they will
determine that a test administrator has the necessary training,
knowledge, skills, and integrity to test students in accordance with
requirements. Finally, they would be required to describe how they will
determine that the test administrator has the ability and facilities to
keep their tests secure against disclosure or release.
In addition, the proposed regulations would implement a new ability
to benefit option added by the HEOA that allows students to
satisfactorily complete six credit hours or 225 clock hours of college
work applicable to a degree or certificate offered by the institution
to prove ability to benefit. As described in the Reasons section
related to this provision, the Department took into consideration
extensive discussions at the negotiated rulemaking sessions in
[[Page 34849]]
developing this proposed regulatory provision. One issue discussed was
whether the hours needed to be earned need to be within the program in
which the student planned to enroll and for which the student applied
to receive title IV, HEA program funds. Some negotiators believed that,
if the coursework were not earned in the program the student planned to
enroll, it might not be rigorous enough, and the provision would not be
effective as a means of demonstrating the student's ability to benefit
from the program in which they intend to enroll. The Department agreed
with other non-Federal negotiators, who contended that the statutory
language did not impose this kind of limitation and that students often
change their mind as to the specific program of enrollment so the
simplest approach to the provision would be best. The Department also
noted that the proposed provision would be a financial aid requirement,
not an admissions criterion, and that an institution could have a
policy that it does not admit any students who do not have a high
school diploma or the equivalent.
Finally, the negotiators questioned whether a student who
established student eligibility under one of the ATB provisions could
be paid for the payment period in which eligibility was established.
The Department's position is that a student who establishes eligibility
by passing an ATB test during a payment period may be paid for the
entire payment period, but that a student who establishes eligibility
through coursework may not be paid for the payment period during which
the student took the requisite coursework because eligibility would not
be established until the payment period was over.
Misrepresentation of Information to Students and Prospective
Students (Sec. Sec. 668.71 through 668.75): The Secretary recognizes
that choosing a college or job training program is an increasingly
important and high-stakes decision for students, and the availability
of accurate information about institutions is crucial. Section 487 of
the HEA and current regulations prohibit any substantial
misrepresentation made by an institution regarding the nature of its
educational program, its financial charges, or the employability of its
graduates.
The Department proposes to strengthen regulatory enforcement
authority against eligible institutions that engage in substantial
misrepresentations. The proposed regulations would restructure Sec.
668.71 so that paragraph (a) describes the actions the Secretary may
take if the Secretary determines that an eligible institution has
engaged in substantial misrepresentation. These actions would include
revocation of the participation agreement, limitations on title IV, HEA
participation, denial of participation applications, or initiation of
proceedings against the institution.
The proposed regulations would provide additional guidance to
institutions to ensure that marketing materials and statements are an
accurate representation of the institution. The proposed definition of
misrepresentation would restate the current definition of the term
(i.e., that misrepresentation is any false, erroneous, or misleading
statement made not only by the eligible institution), but it would also
clarify that the term includes any false, erroneous, or misleading
statement made by one of its representatives, or any ineligible
institution, organization, or person with whom the eligible institution
has an agreement. Moreover, we would clarify in the definition of
misrepresentation that it may be made directly or indirectly to a
student or a member of the public in written, oral, visual, or other
form.
The proposed amendments in subpart F of part 668 would add further
detail to the categories of misrepresentation described in the current
regulations prohibiting misrepresentation. In proposed Sec. 668.72,
which describe the types of false, erroneous, or misleading statements
about an institution's educational program that would be prohibited as
misrepresentations, we would expand the list of prohibited
misrepresentations to include false, erroneous, or misleading
statements relating to the following: Institutional, programmatic, or
specialized accreditation; conditions for acceptance of transfer
credits; whether completion of a course of instruction qualifies
students to take licensing examinations or meet other additional
conditions required for employment in the field for which the program
is represented to prepare students; requirements to complete the course
of study and conditions that would lead to termination of enrollment;
the availability of unsolicited testimonials or endorsements; the
subject matter, content of the course of study, and facts about the
degree, certificate, or other completion document; and whether the
degree to be given has been authorized by the appropriate State
educational agency.
Current Sec. 668.73 describes prohibited false, erroneous, or
misleading statements related to the cost of the program and financial
aid that is available to students. Proposed Sec. 668.73 would expand
the categories to include the cost of the program and the institution's
refund policy if a student does not complete the program; the
availability of any financial assistance offered to students, including
a student's loan repayment responsibility regardless of program
completion or subsequent employment; and the student's right to apply
for or reject any particular type of financial aid or other assistance.
The Department agreed with non-Federal negotiators that students who
enroll in a program should have specific knowledge of the cost of the
program, its refund policy, and financial aid options.
Current Sec. 668.73 describes what constitutes misrepresentation
related to the employability of an institution's graduates and these
prohibitions would be retained. Proposed Sec. 668.73 would prohibit
false statements regarding an institution's knowledge of current or
likely future conditions, compensation, or employment opportunities for
its graduates. Misrepresentations relating to whether employment is
being offered by the institution or that a talent hunt or contest is
being conducted would also be prohibited. In addition, institutions
would be prohibited from making false statements about other
requirements that are generally needed in order to be employed in
certain fields. Negotiators acknowledged that students need to be
informed about employment prospects when considering postsecondary
program options, but were concerned about the ability to provide
accurate information given the economic environment and timeframes
involved.
Current Sec. 668.75 describes the Department's procedures for
reviewing allegations or complaints regarding misrepresentation claims.
The Department proposes removing Sec. 668.75 as these procedures have
not been used to take enforcement actions against institutions for
making substantial misrepresentations. The Department has used its
other administrative remedies to take the appropriate actions against
institutions found to have engaged in misrepresentation. The proposed
regulations would create a new Sec. 668.75 that would prohibit an
institution from suggesting that its participation in title IV, HEA
programs represents a Departmental endorsement of the quality of its
educational programs.
Incentive Compensation (Sec. 668.14(b)): Section 487(a)(20) of the
HEA requires that the title IV, HEA program participation agreement
prohibit an institution from making any
[[Page 34850]]
commission, bonus, or other incentive payments based directly or
indirectly on success in securing enrollments or financial aid to any
persons or entities involved in student recruiting or admissions
activities, or in making decisions about the award of student financial
assistance. This statutory prohibition does not apply to the
recruitment of foreign students residing in foreign countries who are
not eligible to receive Federal financial assistance. Current
regulations to implement HEA Section 487(a)(20) specify twelve types of
activities and arrangements that do not violate the prohibition on
incentive payments to an institution's employees based on success in
securing enrollments. The first safe harbor explains the conditions
under which an institution may adjust compensation without that
compensation being considered an incentive payment. The twelve safe
harbors describe the conditions under which payments that could
potentially be construed as based upon securing enrollments or
financial aid are nonetheless not covered by the statutory prohibition.
As described in greater detail in the Reasons section related to this
provision, the safe harbors under the existing regulations dealt with
adjustments to employee compensation, enrollments in programs not
eligible for title IV, HEA program funds, contracts to provide
training, profit-sharing bonus plans, compensation based upon program
completion, pre-enrollment activities, managerial and supervisory
employees, token gifts, profit distributions, Internet-based
activities, and payments to third parties.
The proposed regulations would eliminate these safe harbors in
response to student and advisor complaints about aggressive sales
tactics from some institutions, institutions' concerns that a lack of
clear guidance made it difficult to be confident of compliance, and the
Department's experience that unscrupulous actors routinely rely on the
safe harbors to circumvent the intent of section 487(a)(20) of the HEA.
The regulations proposed by the Department would eliminate the safe
harbors and prohibit incentive compensation linked to enrollments for
employees engaged in recruitment, admissions, or financial aid
activities. Institutions would be able to make merit-based adjustments
that are not based on securing enrollments or the award of financial
aid. The clarifying remarks about the current safe harbors in the
preamble to this NPRM describe the potential for non-compliant conduct
to be protected by the safe harbors. The proposed regulations would
require institutions to focus on two questions when evaluating employee
bonus or incentive payments: (1) Whether the payment is based on
success in securing enrollments; and (2) whether the payment is an
award of a sum of money. If the answer to each question is yes, the
incentive or bonus payment would not be permitted. Non-Federal
negotiators who agreed with the Department supported the elimination of
the safe harbors as a way to reduce non-compliance and to make the
regulations more consistent with the statute. Other non-Federal
negotiators objected that the safe harbors were needed to explain an
unclear law and to provide boundaries so institutions do not
unintentionally run afoul of the regulations. As discussed in the
Regulatory Alternatives Considered section below, negotiations about
incentive compensation and safe harbors did not lead to agreement.
State Authorization as a Component of Institutional Eligibility
(Sec. Sec. 600.4(a)(3), 600.5(a)(4), 600.6(a)(3), and 600.9): To
participate in the title IV, HEA student aid programs, an institution
must be legally authorized to provide a postsecondary educational
program within the State in which it is located. Current regulations do
not define or describe the statutory requirement that an institution
must be legally authorized in a State. State legal authorization can be
granted through a charter, license, or other written document issued by
an appropriate agency or State official and may be provided by a
licensing board or educational agency. Some States have deferred
approval of educational institutions to accrediting agencies or have
exempted from State authorization requirements a subset of
institutions. Since accrediting agencies generally require that an
institution be legally operating in the State, the Department was
concerned that the checks and balances provided by the separate
processes of accreditation and State legal authorization were being
undermined. The different requirements for authorization as an
educational institution allow some institutions to move from State to
State for less oversight. There was also concern over the Department's
existing policy that an institution was authorized by a State by virtue
of the State's decision not to have any oversight over the institution.
As discussed in the Reasons section related to this provision, the
recent lapse in the existence of California's Bureau for Private
Postsecondary and Vocational Education exemplified the weakness of this
policy in ensuring appropriate oversight of Federal programs.
The proposed regulations would clarify what constitutes State
authorization for participation in title IV, HEA programs. According to
the Department's proposal, legal authorization is represented by a
charter, license, or other document from a State agency or State entity
that specifically grants the authority to operate postsecondary
educational programs, including those leading to a degree or
certificate. The State authorization must be subject to adverse action
by the State and the State must have a process to review and act on
complaints about an institution. An institution would also be
considered legally authorized in a State if the institution were
authorized to offer programs beyond secondary education by the Federal
Government or an Indian Tribe as that term is described in 25 U.S.C.
1802(2) or if it were exempt from State authorization as a religious
institution under the State constitution. The proposed regulations also
would require a State to notify students of the contact information for
filing complaints with an institution's accreditor and State licensing
agency.
Gainful Employment (Sec. Sec. 600.2, 600.4, 600.5, 600.6, 668.6,
and 668.8): The Department intends to begin collecting information on
completers of programs that, by law, must lead to gainful employment in
a recognized occupation. The proposed new requirement would enable the
Department to further evaluate and monitor the outcomes of these
programs.
Under proposed Sec. 668.6(a), an institution would annually submit
information about students who complete a program that leads to gainful
employment in a recognized occupation. That information would include,
at a minimum, identifying information about each student who completed
a program, the CIP code for that program, the date the student
completed the program, and the amounts the student received from
private educational loans and institutional financing plans. In
addition, under proposed Sec. 668.6(b), an institution would be
required to disclose on its Web site information about (1) the
occupations that its programs prepare students to enter, along with
links to occupational profiles on O*NET, (2) the on-time graduation
rate of students entering a program, (3) the cost of each program,
including costs for tuition and fees, room and board, and other
institutional costs typically incurred by students enrolling in the
program, such as books and supplies, (4) beginning no later than
[[Page 34851]]
June 30, 2013, the placement rate for students completing each of those
programs, as determined under Sec. 668.8(g) or a State-sponsored
workforce data system; and (5) the median loan debt incurred by
students who completed each program in the preceding three years,
identified separately as title IV, HEA loan debt and debt from private
educational loans and institutional financing plans.
Definition of a Credit Hour (Sec. Sec. 600.2, 602.24, 603.24, and
668.8): Credit hours are used to measure degree completion and award
title IV, HEA aid, but under current regulations there is no commonly
accepted definition of a credit hour. The increased availability of
weekend, evening, and distance education programs complicates the
measurement of credit hours by seat time in the definitions and
conversion formulas existing under current regulations. In current
Sec. 668.8(k) and (l), the regulations provide the formula that
certain undergraduate programs must use to convert the number of clock
hours offered to the appropriate number of credit hours, with each
semester or trimester hour requiring at least 30 clock hours of
instruction, and each quarter hour requiring at least 20 hours of
instruction. An institution must use the formula to determine if a
program is eligible for title IV, HEA purposes unless (1) the
institution offers an undergraduate program in credit hours that is at
least two academic years in length and leads to an associate degree, a
bachelor's degree, or a professional degree or (2) each course within
the program is acceptable for full credit toward an associate degree,
bachelor's degree, or professional degree offered by the institution,
and the degree offered by the institution requires at least two
academic years of study.
The proposed regulations would add a definition of a credit hour,
amend accrediting agency procedures for reviewing the assignment of
credit hours, and revise the clock-to-credit hour conversion formulas.
Under the proposed regulations, a credit hour is defined as a unit
measuring the amount of work consisting of one hour of classroom or
direct faculty instruction and at least two hours of student work
outside the classroom over a set period of time. The required time
period is fifteen weeks for a semester or trimester credit hour, ten to
twelve weeks for a quarter hour of credit, and the equivalent amount of
work for a different amount of time. For other activities that grant
credit such as internships, studio work, and laboratory work, the
institution must require at least a comparable amount of work to award
credit hours. For programs for which the provisions above are not
appropriate, the institution must establish reasonable equivalencies as
represented by learning outcomes for the amount of work required in the
definition of a credit hour.
The credit hour was developed as part of a process to establish a
standard measure of faculty workloads, costs of instruction, and rates
of educational efficiencies as well as a measure of student work for
transfer students. A standard measure will provide increased assurance
that a credit hour has the necessary educational content to support the
amounts of Federal funds that are awarded to participants in Federal
funding programs and that students at different institutions are
treated equitably in the awarding of those funds. During the negotiated
rulemaking sessions, a few of the non-Federal negotiators were opposed
to any proposal to define a credit hour because they believed that a
definition would impinge upon an institution's ability to create
innovative courses and teaching methods. Other non-Federal negotiators
agreed with the Department that the proposed definition of a credit
hour would provide sufficient flexibilities for institutions and
supported keeping it in the proposed regulations. In response to these
concerns, the proposed regulations were changed to allow institutions
to establish reasonable equivalent measures of a credit hour in
accordance with its accrediting agency's requirements and adopt
alternative measures of student work. The proposed definition of a
credit hour does not change the policy providing funding based only on
credit hours that are the direct result of postsecondary student work
and not Advanced Placement (AP) or International Baccalaureate (IB)
programs, tests or testing out, life experience, or similar competency
measures. No agreement was reached on this issue due to the belief of
some non-Federal negotiators that a definition would limit an
institution's ability to use alternative measures of student work.
In addition, the proposed regulations require accrediting agencies
to review an institution's assignment of credit hours and determine
that they comply with accepted practice in higher education.
Accrediting agencies may use sampling or other methods in reviews of
programs at institutions. The accrediting agency must take actions to
address deficiencies identified in such a review and must inform the
Secretary if it finds systemic noncompliance or significant
noncompliance in one or more programs at an institution.
Finally, the proposed regulations would revise the clock-to-credit
hour conversion process. Proposed Sec. 668.8(l)(1) would modify
existing clock hour to credit hour conversion formulas so a semester or
trimester credit hour must include at least 37.5 clock hours of
instruction and a quarter hour must include at least 25 clock hours of
instruction. If an institution's process for determining credit hours
has not been found deficient by the accrediting or State licensing
agency, then the minimum clock hours of instruction can be reduced to
30 for semester and trimester programs and 20 for quarter programs as
long as the combined instruction and work outside the class meets the
longer requirements described above. With respect to the definition of
an eligible program in Sec. 668.8, the proposed regulations require
that institutions demonstrate that students enroll in and graduate from
the degree program. The proposed regulations also require a program to
use clock hours when accrediting agencies determine that an
institution's policies and procedures about credit hours are deficient
or when completing clock hours is required for graduates to apply for a
license or authorization to practice their intended occupation.
Written Agreements between Institutions of Higher Education
(Sec. Sec. 668.5 and 668.43): Under current regulations, two or more
institutions may enter into agreements for students to continue
receiving title IV, HEA funds when studying away from their ``home''
institution. These agreements fit into three categories: (1) consortium
agreements between eligible institutions; (2) contractual agreements
between an eligible institution and an ineligible institution; and (3)
study abroad arrangements, which may involve a consortium or
contractual agreement between two or more institutions. There is no
requirement in either Sec. 668.5 or 668.43 of the current regulations
that institutions provide information on written arrangements to
enrolled or prospective students.
The proposed regulations would address issues related to written
agreements between institutions with common ownership, restrict
agreements with ineligible institutions, and expand student
notification requirements related to written agreements. The proposed
regulations would redefine the home institution from the one that
enrolls the student to the one that grants the degree or certificate.
Proposed Sec. 668.5(a)(2) would specify that if the institutions
involved in a written agreement are controlled by the same individual,
partnership, or corporation,
[[Page 34852]]
the institution that grants the degree must provide more than 50
percent of the educational program. This would address concerns that
such agreements could be used to circumvent regulations governing
cohort default rates and ``90-10'' provisions. For contractual
agreements between an eligible institution and an ineligible
institution, the proposed regulations would add a restriction that the
ineligible institution has not had its certification to participate in
title IV, HEA programs revoked or had its application for re-
certification denied. The proposed regulations also would limit the
portion of the education program that the ineligible institution could
provide to less than 50 percent. The proposed regulations would also
require institutions to provide information about written agreements to
students. This information would need to include the portion of the
program the home institution is not providing, estimated additional
costs that would be incurred, the method of delivery for the portion of
education outside the home institution, and the name and locations of
the other institutions. During negotiations, the Department explained
that the proposed disclosure requirements would apply to blanket,
existing arrangements between or among institutions and not to
individual, student-initiated written arrangements, or internships and
externships.
Verification of Information Included on Student Aid Applications
(Sec. Sec. 668.52 through 668.61): Under current regulations,
institutions are required to verify the application information of up
to 30 percent of Federal financial aid applicants selected by the
Secretary in a given award year. Institutions have expressed concern
that this verification process is overly complicated and invasive for
applicants' families.
Current subpart E of part 668 governs the verification and updating
of the FAFSA information used to calculate an applicant's expected
family contribution (EFC) as part of the determination of an
applicant's need for student financial assistance. These proposed
regulations would implement statutory changes to Part F of the HEA made
by the HEOA and further align these regulations with enhancements that
have been made to the application processing system. Based on the
Department's review of current policies and procedures, the changes
reflected in these proposed regulations would remove obsolete
definitions, procedures, and references to programs and would include:
(1) Describing institutional and applicant responsibilities for
updating FAFSA information; (2) removing and refining definitions
related to the FAFSA application; (3) codifying current policy that an
institution must complete verification before exercising any authority
under professional judgment; (4) removing the 30 percent cap on the
number of applicants selected by the Secretary that an institution must
verify in order to move towards a more targeted verification system;
(5) restructuring the exclusions from verification section; (6)
requiring any changes to a student's dependency status be updated
throughout the award year, including changes in marital status; (7)
replacing the five items that an institution currently verifies with a
targeted verification process that is specific to each applicant
selected as described in a Federal Register notice published annually
by the Secretary; (8) codifying the Department's IRS Data Retrieval
Process, which allows an applicant to import income and other data from
the IRS into an online FAFSA; (9) updating the IRS deadline granted for
extension filers; (10) clarifying when an institution is required to
reverify the AGI and taxes paid by an applicant and his or her spouse
or parents for individuals with an IRS tax filing extension; (11)
expanding the information a tax preparer must provide on the copy of
the filer's return that has been signed by the preparer; (12)
describing in an annual Federal Register notice other documentation
that an applicant must provide for the information that is selected for
verification; (13) allowing interim disbursements when changes to an
applicant's FAFSA information would not change the amount the applicant
would receive under a title IV, HEA; (14) requiring all corrections to
be submitted to the Secretary for reprocessing; (15) removing all
allowable tolerances; (16) applying the cash management procedures for
proceeds received from a Subsidized Stafford Loan or Direct Subsidized
Loan on behalf of an applicant; and (17) describing the liability of an
institution that disburses title IV, HEA aid to an applicant without
receiving a corrected SAR or ISIR within an established deadline.
The proposed verification regulations would align the verification
process with the effort to simplify the FAFSA and make it flexible
enough to accommodate future changes while still ensuring that students
who receive Federal aid funds are eligible. Institutions would be
required to establish procedures that are consistent with these
provisions. For example, an institution would be required to complete
an applicant's verification before it could exercise its authority to
change the applicant's cost of attendance or data items to calculate
the expected family contribution. Applicants may be excluded from
verification if they do not receive aid under title IV, HEA programs
for reasons outside of verification questions, only receive
unsubsidized aid, or transfer from another institution where
verification was already performed as proven by a letter with ISIR
number from that institution. The specific items to be verified under
the proposed regulations would be published by the Secretary in the
Federal Register for each award year. The regulations would also allow
for information to be verified as having come from the IRS instead of
requiring an applicant's tax form.
Satisfactory Academic Progress (Sec. Sec. 668.16(e), 668.32(f),
668.34): To be eligible for Federal financial aid under title IV of the
HEA, students must make satisfactory academic progress (``SAP'') and
institutions must have a published policy to monitor that progress. As
detailed in the Satisfactory Academic Progress section of this
preamble, the SAP policy must include grade-based and time-related
standards, must apply consistently to students within categories, must
be as strict for title IV, HEA aid recipients as for non-recipients in
the same educational program, must describe the circumstances under
which a student may appeal a determination that the student is not
making satisfactory academic progress, and must require an institution
to review a student's academic progress at the end of each year, at a
minimum. The proposed regulations would restructure the satisfactory
academic progress requirements so that Sec. 668.16(e) would be revised
to include only the requirement that an institution establish, publish,
and apply satisfactory academic progress standards. The remainder of
Sec. 668.16(e) would be moved to proposed Sec. 668.34 so that that
provision would contain all of the required elements of a satisfactory
academic progress policy as well as how an institution would implement
such a policy.
All of the policy elements in the current regulations under
Sec. Sec. 668.16(e) and 668.34 would be combined in proposed Sec.
668.34. The timing provisions would maintain the maximum timeframe of
150 percent of the published length of the educational program whether
measured in credit hours or clock hours (reflected in current Sec.
668.16(e)(2)(ii)(A)). SAP
[[Page 34853]]
policies would need to describe how the institution treats withdrawals,
course repetitions, and transfers from another institution. For
educational programs greater than two academic years, students must
have a GPA of ``C'' or its equivalent at the end of the second year or
have academic standing that is consistent with the institution's
graduation requirements. The proposed regulations would not require
institutions to permit students to appeal. An institution that permits
appeals, however, would be required to describe the appeals process in
its satisfactory academic progress policy. Under proposed Sec.
668.34(a)(9)(ii), a student would be permitted to file an appeal based
on the death of a relative, an injury or illness of the student, or
other special circumstances. Under proposed Sec. 668.34(a)(9)(iii), a
student would be required to submit, as part of the appeal, information
regarding why the student failed to make satisfactory academic
progress, and what has changed in the student's situation that would
allow the student to demonstrate satisfactory academic progress at the
next evaluation. If an institution does not permit appeals, the
satisfactory academic policy must describe how a student may regain
eligibility for assistance under the title IV, HEA programs. Proposed
Sec. 668.34(a)(11) would require that an institution's policy provide
for notification to students of the results of an evaluation that
impacts the student's eligibility for title IV, HEA program funds.
Proposed Sec. 668.34(a)(8) would require institutions that use
``financial aid warning'' and ``financial aid probation'' statuses in
connection with satisfactory academic progress evaluations to describe
these statuses and how they are used in their satisfactory academic
progress policies. The term financial aid warning would be defined as a
status conferred automatically and without action by a student, while
the term financial aid probation would be defined as a status conferred
after a student has submitted an appeal that has been granted. In order
to encourage institutions to provide additional support to students in
a timely manner, the proposed regulations would permit institutions
that review student progress at the end of each payment period to place
students on financial aid warning for one payment period. Proposed
Sec. 668.34(a)(8)(ii) would make clear that an institution with a
satisfactory academic progress policy that includes the use of the
financial aid probation status could require that a student on
financial aid probation fulfill specific terms and conditions, such as
taking a reduced course load or enrolling in specific courses.
Recent questions from institutions and reviews of institutional
satisfactory academic progress policies have suggested that it is
possible for an institution to have a policy that meets all of the
current regulatory criteria, but due to use of automatic probationary
periods, permits students to receive aid for as long as 24 months even
though they are not meeting the institution's satisfactory progress
standards. The proposed regulations are designed to implement a more
structured, comprehensive, and consistent approach to development and
implementation of institutional satisfactory progress policies.
Retaking Coursework (Sec. 668.2): The proposed regulations would
amend the definition of ``full-time student'' in Sec. 668.2 to allow
repeated coursework to count towards a student's enrollment status in
term-based programs. Currently, students in term-based credit hour
programs may get paid for retaking courses as long as the credits are
in addition to and not a replacement for previously earned credits, and
the student meets the institution's overall satisfactory academic
progress standards. Non-Federal negotiators expressed concern that
institutions were unable to track this information without a burdensome
program audit of each individual student. The Department agreed and
proposed to amend the definition of full-time to allow such credits to
count toward enrollment status and eligibility for payment under the
title IV, HEA programs. Tentative agreement was reached on this issue.
Return of Title IV, HEA Program Funds: Term-based Programs with
Modules or Compressed Courses (Sec. 668.22(a) and (f)): Current
regulations related to the return of title IV, HEA program funds when a
student withdraws do not address the issue of student withdrawals from
programs with courses in modules or compressed courses. Under current
regulations, when a student withdraws from an institution, the
institution must determine the amount of title IV, HEA aid the student
has earned for the period the student attended. For term based programs
with several courses offered concurrently for the length of the term,
the student may remain in one course and not be considered as
withdrawn. Department policy equates the completion of one course or
module, within a term in which a student is expected to continue
attendance in additional coursework, to the completion of one
traditional course in a program with courses taken concurrently over
the full term. As a result of this policy, a student who attends a week
or two of a fifteen week term and completes a module will not be
determined to have withdrawn, so the student or the institution can
keep aid intended to cover fifteen weeks.
The proposed regulations offer an opportunity to review this
policy. Under the proposed regulations, students would be considered
withdrawn as follows: In programs measured in credit hours, if the
student does not complete all the days in the payment period or period
of enrollment that the student was scheduled to complete prior to
withdrawing. For credit hour programs, the calculation of the
percentage of the payment period or period of enrollment completed
would take into account the total number of calendar days that the
student was scheduled to complete prior to withdrawing without regard
to any course completed by the student that is less than the length of
the term. In the case of a program that is measured in clock hours, the
student would be considered to have withdrawn if he or she does not
complete all of the clock hours in the payment period or period of
enrollment that the student was scheduled to complete prior to
withdrawing.
Return of Title IV, HEA Program Funds: Taking Attendance (Sec.
668.22(b)): In order to implement provisions related to the return of
funds when a student withdraws, institutions must be able to determine
the date a student is considered to have withdrawn. Current regulations
specify distinctions between institutions required to take attendance
by an outside agency and those institutions that are not required to
take attendance. For institutions required to take attendance, the date
of withdrawal is determined from attendance records. For other
institutions, the date of withdrawal may be the date the student
initiated the withdrawal process, the date the student provided
official notice of intent to withdraw, the midpoint of the payment
period if the student gave no notice of withdrawal, or, in lieu of the
above, the last day of the student's attendance at an academically-
related activity. The lack of precision for a withdrawal date for these
institutions potentially allows the abuse of Federal funds.
The proposed regulations would require that if an institution has
attendance records, as required by an outside entity or the institution
itself, the attendance records should be used for the withdrawal date.
Current nonregulatory guidance regarding an institution that is
required to take
[[Page 34854]]
attendance, or requires that attendance be taken, for a limited period
of time, such as for the first two weeks of courses or up until a
``census date'' would be incorporated. These proposed provisions would
specify that an institution must use its attendance records to
determine a withdrawal date for a student who withdraws during that
limited period, and a student who subsequently stops attending during
the payment period would be treated as a student for whom the
institution was not required to take attendance. The proposed
regulations would also incorporate current guidance that if an
institution is required to take attendance, or requires that attendance
be taken, on a specified date to meet a census reporting requirement,
the institution is not considered to take attendance.
Non-Federal negotiators pointed out that having to determine a more
exact date of withdrawal, as opposed to assuming a 50 percent point,
would be more burdensome. They also noted that attendance does not
necessarily accurately reflect academic activity, and also stated that
they cannot ensure that faculty members will keep accurate and up-to-
date attendance records. The Department recognizes these concerns, but
maintains that the best date available should be used to determine the
amount of time that a student was in attendance to support the fair
treatment of students and avoid the potential for fraud and abuse of
Federal funds.
Disbursements of Title IV, HEA Program Funds (Sec. 668.164(i)): As
described in the preamble to this NPRM, current regulations provide
that an institution must disburse title IV, HEA program funds (except
for FWS funds) on a payment period basis and establish requirements for
crediting a student's account with Federal Pell Grant funds. Those
requirements also apply to ACG, National SMART Grant, TEACH Grant,
FSEOG, Federal Perkins Loan, Direct Loan, and FFEL program funds.
Current regulations permit institutions to disburse Pell Grants in a
manner that best meets the needs of the student, and the proposed
regulations would add provisions to specifically limit delays in
disbursements.
Students who do not receive Pell Grants in a timely manner may
resort to taking loans or using personal funds, go without needed items
such as books, or withdraw from school for financial reasons. The
proposed regulations will require institutions to provide a way for a
Federal Pell Grant eligible student to obtain or purchase required
books and supplies by the seventh day of a payment period under certain
conditions. The proposed regulations would limit the required early
payment of anticipated credit balances to Federal Pell Grant-eligible
students who have met all disbursement requirements 10 days before the
first day of class for the payment period, and apply only if the
student will have a title IV, HEA credit balance. The proposed language
gives institutions the flexibility to determine the method by which
they provide funds to students, which can include a book voucher or
crediting books to the student's institutional account. The proposed
regulations would not change existing liability if the student never
begins attendance in any classes, leaving it with the institutions and
not the students.
The following section addresses the alternatives that the Secretary
considered in developing these proposed regulations. These alternatives
are also discussed in more detail in the Reasons sections of this
preamble related to the specific regulatory provisions.
Regulatory Alternatives Considered
Definition of High School Diploma (Sec. 668.16(p)): Initially, the
Secretary proposed regulatory language that that would have required
institutions to maintain three listings of secondary schools (schools
that are acceptable, schools that are unacceptable, and schools that
require further evaluation) based on regulatory criteria for
determining the acceptability of their credential for title IV, HEA
program purposes. Non-Federal negotiators objected that K-12 issues
should be handled at the State level and that requiring institutions to
maintain such lists was too great an administrative burden. Based on
these concerns, the Department agreed to assume responsibility for
establishing and maintaining a list of valid secondary schools, and
tentative agreement was reached on this provision.
Incentive Compensation (Sec. 668.14(b)): As discussed in the
Incentive Compensation section of the preamble, non-Federal negotiators
proposed and counter-proposed draft regulatory language related to
incentive compensation for the Department to consider. In turn, the
Department addressed some of the isues raised in the negotiations. For
example, the Department made clear that any individuals who are engaged
in any student recruitment or admissions activity or in making
decisions about the award of student financial aid--including those in
supervisory positions--would be impacted by these proposed provisions.
Moreover, the Department clarified that the following activities would
not necessarily be prohibited under the proposed regulations: the use
of volume-driven shared services, contracts for financial aid services
based on a headcount basis, third party Internet marketing activities
paid based on clicks and not enrollments, and token gifts for contacts
not linked to enrollments.
The Department agreed to include a definition of the term
commission, bonus, or other incentive payment in the proposed Sec.
668.14(b)(22)(iii)(A) that is unambiguous in prohibiting payment of any
money or item of value on the basis of direct or indirect success in
securing enrollments or the award of financial aid.
Several negotiators were concerned that under the proposed
regulations, institutions would be prohibited from paying merit-based
increases to their financial aid or admissions personnel. The
Department contends that an institution could use a variety of standard
evaluative factors as the basis for such an increase; however, it would
not be permitted to consider the employee's success in securing student
enrollments or the award of financial aid or related institutional
goals based on that success among those factors. One negotiator felt
strongly that it was critical to use the word ``solely,'' or some other
modifier, to limit the prohibition in proposed Sec. 668.14(b)(22)(i).
This negotiator said that the use of the word solely, or some other
modifier, would be consistent with the use of that term solely in the
first safe harbor reflected in current Sec. 668.14(b)(22)(ii)(A). As
discussed earlier in this preamble, given the Department's experience
with how the first safe harbor in current Sec. 668.14(b)(22) has been
abused, the Department does not believe that such a construction is
warranted. In addition, some negotiators advocated strongly for an
institution's ability to pay bonuses on the basis of students who
complete their program. The Department believes that these regulations
must clearly reinforce the statutory provision and exclude the
possibility of basing any portion of an adjustment on success in
securing student enrollments or financial aid awards. No agreement was
reached on incentive compensation.
State Authorization as a Component of Institutional Eligibility
(Sec. Sec. 600.4(a)(3), 600.5(a)(4), 600.6(a)(3), and 600.9): The
Department clarified aspects of this provision in response to concerns
expressed by non-Federal negotiators. Federal or Indian Tribe
authorization was included, and the ability of State entities other
than State Agencies such
[[Page 34855]]
as State legislatures and State Constitutions to grant authorization
was made explicit. Provisions concerning monitoring the quality of
educational programs and financial responsibility were removed as
unnecessarily duplicative of Federal or accrediting agency actions. The
Reasons section of the preamble details the development of this
provision. Some negotiators remained concerned that these proposed
regulations would allow States to continue to rely on an institution's
status with an outside entity for State legal authorization and that
there would no longer be a requirement that a State review an
institution's fiscal viability. No agreement was reached on this
provision.
Written Agreements between Institutions of Higher Education
(Sec. Sec. 668.5 and 668.43): During negotiated rulemaking, the
Department's initial proposal was to require accrediting or State
agency review of written agreements between institutions of higher
education if the portion of an educational program provided under the
written arrangement with another eligible institution, or with a
consortium of eligible institutions, were more than 50 percent.
Subsequently, several non-Federal negotiators explained that, contrary
to the Department's initial understanding, it was not common practice
for accrediting agencies to review a significant portion of written
arrangements, even those between or among eligible institutions. After
hearing concerns about increased workloads and impeded development of
innovative programs, the Department agreed to reconsider its draft
regulatory language and to focus the proposed changes more narrowly on
the types of institutions and situations where problems had been
identified. The Department subsequently proposed limiting the portion
of an educational program that could be provided under a written
arrangement between two eligible for-profit institutions under common
ownership or control to 25 percent. After negotiations about the
appropriate percentage and the institutions to which it should apply,
the Department agreed to revise the proposed language to refer to
eligible institutions that are owned or controlled by the same
individual, partnership or corporation and to specify that the
institution that grants the degree or certificate must provide 50
percent or more of the educational program. When presenting this draft
regulatory language to the negotiated rulemaking committee, the Federal
negotiator explained that it is not the Department's intention for
either public or private, non-profit institutions to be covered by the
proposed language as such institutions are not owned or controlled by
other entities and generally act autonomously.
Return of Title IV, HEA Program Funds: Term-based Programs with
Modules or Compressed Courses (Sec. 668.22(a) and (f)): During the
negotiation sessions, non-Federal negotiators expressed concern that
the proposed regulations would penalize students and burden
institutions with a significant increase in the number of return to
title IV, HEA funds calculations. The non-Federal negotiators presented
three options to address their concerns. The first option was to
exclude students who completed the same enrollment status for which
they were originally paid title IV, HEA aid. The second option was to
exclude students who completed 50 percent of the credits that were
awarded and 50 percent of the projected enrollment time. The third
option was to only apply the proposed regulations to compressed
coursework that was shorter than a ``to-be-determined'' percent of the
payment period; the non-Federal negotiators did not reach agreement as
to what the appropriate percentage should be. The Department
appreciates the concerns expressed by the non-Federal negotiators, but
continues to believe that the proposed changes are necessary to ensure
the equitable application of these provisions for all students,
regardless of the academic calendar of the programs that students are
attending.
Disbursements of Title IV, HEA Program Funds (Sec. 668.164(i)):
Some non-Federal negotiators stated that many institutions advance
funds or issue vouchers that students use to obtain books and supplies,
and that under current regulations, the institution risks losing the
amount advanced if the student does not begin classes. For this reason,
these non-Federal negotiators argued that in exchange for requiring an
institution to advance funds or issue vouchers early in the payment
period before the institution could establish student attendance, the
student should be liable for returning the funds. In response to this
concern, the Department drafted regulatory language to shift liability
for this debt to students, but the proposal was rejected. Other
negotiators objected that student liability for this debt might
preclude reenrollment or exacerbate predatory practices at some
institutions where students were promised an advance of funds simply
for enrolling in programs. As a result of these negotiations, the
proposed regulations keep liability at the institutional level.
Benefits
Benefits provided in these proposed regulations include updated
administrative procedures for the Federal student aid programs; a
definition and process to determine the validity of a student's high
school diploma; enhanced reliability and security of ATB tests; an
additional option for students to prove ability to benefit by
successfully completing college coursework; increased clarity about
incentive compensation for employees at institutions of higher
education; reporting of information on program completers for programs
leading to gainful employment, including costs, debt levels, graduation
rates, and placement rates; the establishment of minimum standards for
credit hours; greater transparency for borrowers participating in the
programs offered under written agreements between institutions; greater
detail about misrepresentation in marketing and recruitment materials;
a more structured and consistent approach to the development and
implementation of satisfactory academic progress policies; updated and
simplified procedures for verifying FAFSA applicant information;
updated regulations related to the return of title IV, HEA funds when a
student withdraws; harmonization of Direct Loan and Teach Grant
disbursement procedures with other title IV, HEA programs; and revised
disbursement requirements to ensure Federal Pell Grant recipients can
access funds in a timely manner. It is difficult to quantify benefits
related to the new institutional and other third-party requirements, as
there is little specific data available on the effect of the provisions
on borrowers, institutions, or the Federal taxpayer. The Department is
interested in receiving comments or data that would support a more
rigorous analysis of the impact of these provisions.
As discussed in greater detail under Net Budget Impacts, these
proposed provisions result in net costs to the government of $0.0
million over 2011-2015.
Costs
Several of the proposed regulations would require regulated
entities to develop new disclosures and other materials, as well as
accompanying dissemination processes. Institutions would also be
required to update existing policies and procedures related to
satisfactory academic progress. Other proposed regulations generally
would require discrete changes in specific parameters associated with
existing requirements--such as changes to title
[[Page 34856]]
IV, HEA disbursement procedures, updated processes for verification of
FAFSA application information, clearer standards for the return of
title IV, HEA program funds following a student's withdrawal, and
updated definitions and processes for confirming the validity of a high
school diploma --rather than wholly new requirements. Accordingly,
entities wishing to continue to participate in the title IV, HEA
programs have already absorbed many of the administrative costs related
to implementing these proposed regulations. Marginal costs over this
baseline are primarily due to new procedures that, while possibly
significant in some cases, are an unavoidable cost of continued program
participation.
The Department would welcome comment on the analysis presented
here. We also welcome analyses that others have done on this proposal
which we will consider as we assess the impact of the proposed
regulation as we prepare to publish it in final form later this year.
In assessing the potential impact of these proposed regulations,
the Department recognizes that certain provisions are likely to
increase workload for some program participants. This additional
workload is discussed in more detail under the Paperwork Reduction Act
of 1995 section of this preamble. Additional workload would normally be
expected to result in estimated costs associated with either the hiring
of additional employees or opportunity costs related to the
reassignment of existing staff from other activities. In total, these
proposed changes are estimated to increase burden on entities
participating in the Federal Student Assistance programs by 5,756,506
hours. Of this increased burden, 3,596,111 hours are associated with
institutions, 9,454 hours with ATB test publishers and ATB test
administrators. An additional 2,150,941 hours are associated with
borrowers, generally reflecting the time required to read new
disclosures or submit required information.
As detailed in the Paperwork Reduction Act of 1995 section of this
NPRM, the additional paperwork burden is attributable to several
provisions, with the greatest additional burden coming from the revised
FAFSA verification process. Of the 3.6 million hours of additional
burden associated with institutions, 1.8 million relate to FAFSA
verification. While the average number of items to be verified is
expected to decrease, the growth in the number of applicants and the
requirement to submit all changes to the Department is estimated to
increase overall burden. Other paperwork burden increases include
729,725 hours related to academic reviews and development of academic
plans under proposed Sec. 668.34, 425,075 hours related to calculation
of unearned amounts when a student withdraws under proposed Sec.
668.22, 289,005 hours associated with updating marital and dependency
status under proposed Sec. 668.55, 105,377 hours related to the
gainful employment reporting and disclosure provisions in proposed
Sec. 668.6, 48,391 hours related to ATB test administration and
reporting under proposed Sec. Sec. 668.151 and 668.152, 67,870 hours
associated with disclosure of information about an institution's
written agreements in proposed Sec. 668.43, 54,337 hours related to
disbursement of funds to Pell Grant recipients for books and supplies
under proposed Sec. 668.164, 21,982 hours related to the development
of a high school diploma validation process and the validation of
questionable diplomas under proposed Sec. 668.16, and 18,349 hours
related to clock hour to credit hour conversion and the inclusion of
outside work for program eligibility under proposed Sec. 668.8. For
ATB test publishers and administrators, the increased burden of 9,454
hours comes from the reporting, recordkeeping, test anomaly analysis
and other requirements in proposed Sec. Sec. 668.144, 668.150, and
668.151. The increased burden on students is concentrated in the FAFSA
verification and status updating processes with 1,604,800 hours under
proposed Sec. Sec. 668.55, 668.56, and 668.59, with additional burden
associated with the withdrawal process under Sec. 668.22 and
satisfactory academic progress policies under Sec. 668.34.
Thus, for the specific information collections listed in the
Paperwork Reduction Act section of this notice, the total cost
estimates are as follows: For Information Collection 1845-0041, the
total cost will be $65,913,938, for Information Collection 1845-NEW2,
the total cost attributable to these regulatory changes will be
$18,750,120, for Information Collection 1845-0022, the total cost will
be $13,900,328, for Information Collection 1845-NEW1, the total cost
attributable to the regulatory changes will be $2,182,885, for
Information Collection 1845-0049, the total cost will be $1,097,588,
and for Information Collection 1845-NEW3, the total cost attributable
to these regulatory changes will be $1,012,461.
The monetized cost of this additional burden, using wage data
developed using Bureau of Labor Statistics available athttp://
www.bls.gov/ncs/ect/sp/ecsuphst.pdf, is $102,677,320, of which $67.23
million is associated with institutions, $0.18 million with ATB test
publishers and administrators, and $35.28 million with borrowers. For
institutions, test publishers, and test administrators, an hourly rate
of $18.63 was used to monetize the burden of these provisions. This was
a blended rate based on wages of $15.51 for office and administrative
staff and $36.33 for managers, assuming that office staff would perform
85 percent of the work affected by these regulations. For the gainful
employment provision, an hourly rate of $20.71 was used to reflect
increased management time to establish new data collection procedures
associated with that provision. For students, the first quarter 2010
median weekly earnings for full-time wage and salary workers were used.
This was weighted to reflect the age profile of the student loan
portfolio, with half at the $457 per week of the 20 to 24 age bracket
and half at the $691 per week of the 25 to 34 year old bracket. This
resulted in a $16.40 hourly wage rate to use in monetizing the burden
on students.
Given the limited data available, the Department is particularly
interested in comments and supporting information related to possible
burden stemming from any additional workload expected under the
proposed regulations. Estimates included in this NPRM will be
reevaluated based on any information received during the public comment
period.
Net Budget Impacts
The proposed regulations are estimated to have a net budget impact
of $0.0 million over FY 2011-2015. Consistent with the requirements of
the Credit Reform Act of 1990, budget cost estimates for the student
loan programs reflect the estimated net present value of all future
non-administrative Federal costs associated with a cohort of loans. (A
cohort reflects all loans originated in a given fiscal year.)
These estimates were developed using the Office of Management and
Budget's (OMB) Credit Subsidy Calculator. (This calculator will also be
used for re-estimates of prior-year costs, which will be performed each
year beginning in FY 2009). The OMB calculator takes projected future
cash flows from the Department's student loan cost estimation model and
produces discounted subsidy rates reflecting the net present value of
all future Federal costs associated with awards made in a given fiscal
year. Values are calculated using a ``basket of zeros'' methodology
under which each cash flow is
[[Page 34857]]
discounted using the interest rate of a zero-coupon Treasury bond with
the same maturity as that cash flow. To ensure comparability across
programs, this methodology is incorporated into the calculator and used
government-wide to develop estimates of the Federal cost of credit
programs. Accordingly, the Department believes it is the appropriate
methodology to use in developing estimates for these proposed
regulations. That said, however, in developing the following Accounting
Statement, the Department consulted with OMB on how to integrate our
discounting methodology with the discounting methodology traditionally
used in developing regulatory impact analyses.
Absent evidence on the impact of these proposed regulations on
student behavior, budget cost estimates were based on behavior as
reflected in various Department data sets and longitudinal surveys
listed under Assumptions, Limitations, and Data Sources. Program cost
estimates were generated by running projected cash flows related to
each provision through the Department's student loan cost estimation
model. Student loan cost estimates are developed across five risk
categories: Two-year proprietary institutions, two-year public and
private not-for-profit institutions, freshman and sophomores at four-
year institutions, juniors and seniors at four-year institutions, and
graduate students. Risk categories have separate assumptions based on
the historical pattern of behavior--for example, the likelihood of
default or the likelihood to use statutory deferment or discharge
benefits--of borrowers in each category.
The Department estimates no budgetary impact for most of the
proposed regulations included in this NPRM as there is no data
indicating that the provisions will have any impact on the volume or
composition of Federal student aid programs.
Assumptions, Limitations, and Data Sources
Impact estimates provided in the preceding section reflect a
baseline in which the changes implemented in these proposed regulations
do not exist. Costs have been quantified for five years. In general,
these estimates should be considered preliminary; they will be
reevaluated in light of any comments or information received by the
Department prior to the publication of the final regulations. The final
regulations will incorporate this information in a revised analysis.
In developing these estimates, a wide range of data sources were
used, including data from the National Student Loan Data System;
operational and financial data from Department of Education systems,
including especially the Fiscal Operations Report and Application to
Participate (FISAP); and data from a range of surveys conducted by the
National Center for Education Statistics such as the 2008 National
Postsecondary Student Aid Survey, the 1994 National Education
Longitudinal Study, and the 1996 Beginning Postsecondary Student
Survey. Data from other sources, such as the U.S. Census Bureau, were
also used. Data on administrative burden at participating schools,
accreditors, test administrators, and third-party servicers are
extremely limited; accordingly, as noted earlier in this discussion,
the Department is particularly interested in receiving comments in this
area.
Elsewhere in this SUPPLEMENTARY INFORMATION section we identify and
explain burdens specifically associated with information collection
requirements. See the heading Paperwork Reduction Act of 1995.
Accounting Statement
As required by OMB Circular A-4 (available athttp://
www.Whitehouse.gov/omb/Circulars/a004/a-4.pdf), in Table 2, we have
prepared an accounting statement showing the classification of the
expenditures associated with the provisions of these proposed
regulations. This table provides our best estimate of the changes in
Federal student aid payments as a result of these proposed regulations.
Expenditures are classified as transfers from the Federal government to
student loan borrowers.
Table 2--Accounting Statement: Classification of Estimated Expenditures
[In millions]
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers $0
From Whom To Whom? Federal Government to
Student Loan Borrowers.
------------------------------------------------------------------------
Clarity of the Regulations
Executive Order 12866 and the Presidential memorandum on ``Plain
Language in Government Writing'' require each agency to write
regulations that are easy to understand.
The Secretary invites comments on how to make these proposed
regulations easier to understand, including answers to questions such
as the following:
Are the requirements in the proposed regulations clearly
stated?
Do the proposed regulations contain technical terms or
other wording that interferes with their clarity?
Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphing, etc.) aid or reduce
their clarity?
Would the proposed regulations be easier to understand if
we divided them into more (but shorter) sections? (A ``section'' is
preceded by the symbol ``Sec. '' and a numbered heading; for example,
Sec. 601.30.)
Could the description of the proposed regulations in the
``Supplementary Information'' section of this preamble be more helpful
in making the proposed regulations easier to understand? If so, how?
What else could we do to make the proposed regulations
easier to understand?
To send any comments that concern how the Department could make
these proposed regulations easier to understand, see the instructions
in the ADDRESSES section of this preamble.
Regulatory Flexibility Act Certification
The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities. These proposed regulations would affect institutions that
participate in title IV, HEA programs, ATB test publishers, and
individual students and loan borrowers. The U.S. Small Business
Administration Size Standards define for-profit institutions as ``small
businesses'' if they are independently owned and operated and not
dominant in their field of operation with total annual revenue below
$7,000,000, and defines non-profit institutions as small organizations
if they are independently owned and operated and not dominant in their
field of operation, or as small entities if they are institutions
controlled by governmental entities with populations below 50,000.
Data from the Integrated Postsecondary Education Data System
(IPEDS) indicate that roughly 4,379 institutions participating in the
Federal student assistance programs meet the definition of ``small
entities.'' The following table provides the distribution of
institutions and students by revenue category and institutional
control.
[[Page 34858]]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Public Private NFP Proprietary Tribal
-------------------------------------------------------------------------------------------------------------------------------
Revenue category No. of No. of No. of No. of
No. of schools students No. of schools students No. of schools students No. of schools students
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$0 to $500,000.................................................. 43 2,124 103 13,208 510 38,774 .............. ..............
$500,000 to $1 million.......................................... 44 7,182 81 9,806 438 61,906 1 137
$1 million to $3 million........................................ 98 29,332 243 65,614 745 217,715 3 555
$3 million to $5 million........................................ 75 65,442 138 60,923 303 182,362 .............. ..............
$5 million to $7 million........................................ 49 73,798 99 62,776 224 185,705 5 2,525
$7 million to $10 million....................................... 78 129,079 110 84,659 228 235,888 9 4,935
$10 million and above........................................... 1,585 18,480,000 1,067 4,312,010 383 1,793,951 14 18,065
-------------------------------------------------------------------------------------------------------------------------------
Total....................................................... 1,972 18,786,957 1,841 4,608,996 2,831 2,716,301 32 26,217
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Approximately two-thirds of these institutions are for-profit
schools subject to the disclosure and reporting requirements related to
programs leading to gainful employment described in this NPRM. Other
affected small institutions include small community colleges and
tribally controlled schools. For these institutions, the new disclosure
and administrative requirements imposed under the proposed regulations
could impose some new costs as described below. The impact of the
proposed regulations on individuals is not subject to the Regulatory
Flexibility Act.
As discussed in the preamble to this NPRM, the proposed program
integrity regulations are being developed to update administrative
procedures for the Federal student aid programs and to ensure that
funds are provided to students at eligible programs and institutions.
Many of the provisions addressed in this NPRM modify existing
regulations and requirements. For example, the proposed regulations on
FAFSA verification would change the number of items to be verified but
would not require the creation of a new process. The following table
summarizes the estimated total hours, costs, and requirements
applicable to small entities from these provisions.
----------------------------------------------------------------------------------------------------------------
OMB Control
Reg. section No. Hours Costs
----------------------------------------------------------------------------------------------------------------
668.6 1845-NEW1 82,637 1,711,818
Annual submission of private loan, CIP, and 668.6(a) .............. 34,999 725,001
identifying data for completers by program..
Report CIP codes for all attendees........... ................. .............. 37,138 769,317
Disclose occupational information, graduation 668.6(b) .............. 10,500 217,500
rates, program placement rates, and program
costs.......................................
668.8 1845-0022 12,035 224,250
Determine if program is affected, evaluate ................. .............. .............. ..............
amount of outside student work that should
be included, and perform credit to clock
hour conversion.............................
668.16 1845-0022 14,418 268,650
Develop a high school diploma validity 668.16(p) .............. 13,106 244,208
process.....................................
Verify questionable diplomas................. 668.16(p) .............. 1,312 24,443
668.22 1845-0022 278,807 5,195,005
Establish withdrawal date and calculate ................. .............. .............. ..............
percentage of payment period or period of
enrollment completed........................
668.34 1845-NEW2 478,627 8,918,250
Review proposed regulations and implement 668.34(a) .............. 11,234 209,316
changes to ensure compliance................
Perform academic reviews at the end of each 668.34(c) .............. 137,282 2,557,972
payment period..............................
Develop academic plan for students who do not 668.34(c) .............. 120,123 2,238,249
achieve satisfactory academic progress when
reviewed at end of payment period...........
Perform academic reviews at institutions that 668.34(d) .............. 111,994 2,086,777
do so annually..............................
Develop academic plan for students who do not 668.34(d) .............. 97,995 1,825,936
achieve satisfactory academic progress when
reviewed annually...........................
668.43 1845-NEW2 44,516 829,465
Disclose information about written agreements ................. .............. 43,930 818,552
Make contact information for filing 668.43(b) .............. 586 10,914
complaints to accreditor and State approval
or licensing agency available to enrolled
and prospective students....................
668.55 1845-0041 189,558 3,532,041
Update household size throughout award year.. ................. .............. 170,603 3,178,843
Update marrital status throughout award year. ................. .............. 18,956 353,198
668.57 1845-0041 401,411 7,479,487
Review verification responses for acceptable ................. .............. .............. ..............
documentation...............................
668.59 1845-0041 802,822 14,958,975
Removes tolerances and requires institutions ................. .............. .............. ..............
to report all changes to applicants' FAFSA
information resulting from verification.....
Recalculate applicant's EFC if information ................. .............. .............. ..............
changes from verification...................
668.151 1845-0049 28,313 527,548
Keep records of individuals who take ATB 668.151(g)(4) .............. 25,279 471,024
tests and details about the administrator...
Keep documentation of individual's disability 668.151(g)(5) .............. 3,034 56,524
and testing arrangements provided...........
[[Page 34859]]
668.152 1845-0049 3,427 63,857
Maintain the scored ATB tests and collect and ................. .............. .............. ..............
submit copies of completed ATB tests or a
listing to the test publisher or State
weekly......................................
668.164 1845-NEW3 35,640 664,073
Provide a way for Pell Grant recipients to ................. .............. .............. ..............
obtain or purchase required books and
supplies by the 7th day of a payment period
under certain conditions....................
----------------------------------------------------------------------------------------------------------------
To assess overall burden imposed on institutions meeting the
definition of small entities, the Department developed a methodology
using IPEDS data and the percentage of institutions with revenues below
$7 million and all non-profit institutions, allocating approximately 66
percent of the paperwork burden to small institutions. Using this
methodology, the Department estimates that the proposed regulations
would increase total burden hours for these schools by 2.37 million, or
roughly 541 hours per institution. Monetized using salary data from the
Bureau of Labor Statistics, this burden is $44.4 million and $10,133,
respectively. If calculated using the distribution of students from
2007-08, the share of the burden allocated to small institutions would
be much lower at approximately 21 percent, resulting in an estimated
burden of 186 hours and $3,510 per institution. Even the more
conservative estimate of $10,133 represents 1 percent or less of the
midpoint revenue for all but the lowest revenue category, for which it
is 4 percent of midpoint revenue.
For institutions, an hourly rate of $18.63 was used to monetize the
burden of these provisions. This was a blended rate based on wages of
$15.51 for office and administrative staff and $36.33 for managers,
assuming that office staff would perform 85 percent of the work
affected by these regulations. For the gainful employment provision, an
hourly rate of $20.71 was used to reflect increased management time to
establish new data collection procedures associated with that
provision. These rates are the same as those used for all institutions
in the costs section of this analysis, reflecting the fact that the
primary cost of meeting the paperwork burden is in additional labor and
wages at small institutions should not be systematically higher than
those at all institutions. The Department welcomes comments from
institutions regarding the costs of meeting the additional burdens
described in the Paperwork Reduction Act section of this NPRM.
Where possible, the Department has allowed institutions flexibility
to establish processes to comply that fit the institution's
administrative capabilities. For example, the requirement to distribute
funds to Pell Grant recipients for books and supplies within 7 days of
the start of the payment period allows institutions to use book
vouchers or a credit to the student's account. The Department has also
tried to allow more time to establish procedures for new data
collections, such as the placement rate information required in the
data collection related to gainful employment. While these timing
provisions are available to all institutions, they should help small
institutions have time for the necessary adjustments. Granting such
extensions to all institutions is simpler to administer and provides
additional certainty to institutions that will not have to anticipate
if their revenues will fall below the small business threshold to get
more time for compliance. Approximately 60 percent of the paperwork
burden associated with these regulations comes in OMB 1845-0041 from
updating FAFSA application information and reporting all changes
resulting from verification. These updated requirements will help
ensure eligible students receive aid. As detailed in the Paperwork
Reduction Act section of this NPRM, the increase in burden associated
with the FAFSA acceptable documentation provision is largely driven by
the increase in student applicants since the burden was last
calculated. The number of verifications is estimated to have increased
from 3.0 million in 2002-03 to 5.1 million in 2008-09. Without the
regulatory change estimated to reduce the number of items to be
verified, the paperwork burden on small institutions in OMB 1845-0041
would increase by an additional 267,607 hours. Based on these
estimates, the Department believes the proposed new requirements do not
impose significant new costs on these institutions.
No alternative provisions were considered that would target small
institutions with exemptions or additional time for compliance.
Additional time or flexibility was granted to all institutions based on
the nature of the provision and the data requested. The Secretary
invites comments from small institutions and other affected entities as
to whether they believe the proposed changes would have a significant
economic impact on them and, if so, requests evidence to support that
belief.
Paperwork Reduction Act of 1995
Sections 668.6, 668.8, 668.16, 668.22, 668.34, 668.43, 668.55,
668.56, 668.57, 668.59, 668.144, 668.150, 668.151, 668.152, and 668.164
contain information collection requirements. Under the Paperwork
Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department has submitted
a copy of these sections to OMB for its review.
Section 668.6--Gainful Employment
The proposed regulations would impose new requirements on certain
programs that by law must, for purposes of the title IV, HEA programs,
prepare students for gainful employment in a recognized occupation. For
public and private nonprofit institutions, a program that does not lead
to a degree would be subject to the eligibility requirement that the
program lead to gainful employment in a recognized occupation, while a
program leading to a degree, including a two-academic-year program
fully transferrable to a baccalaureate degree, would not be subject to
this eligibility requirement. For proprietary institutions, all
eligible degree and nondegree programs would be required to lead to
gainful employment in a recognized occupation, except for a liberal
arts baccalaureate program under section 102(b)(1)(A)(ii) of the HEA.
The institution would be required under proposed Sec. 668.6(a) to
submit annually, information that would include, at a minimum,
identifying information about each student who completed a program, the
CIP code for that program, the date the student completed the program,
and the amounts the student received from private educational loans and
institutional financing plans. We estimate that it will take the
affected 2,086 proprietary institutions, on average, 10 hours to meet
these reporting requirements for their
[[Page 34860]]
occupational training programs for a total estimated increase in burden
of 20,860 hours. We estimate that it will take the affected 238 private
non-profit institutions, on average, 10 hours to meet these reporting
requirements for their occupational training programs for a total
estimated increase in burden of 2,380 hours. We estimate that it will
take the affected 2,139 public institutions, on average, 10 hours to
meet these reporting requirements for their occupational training
programs for a total estimated increase in burden of 21,390 hours.
Collectively, we estimate that burden for institutions to meet
these proposed reporting requirements in accordance with procedures
established by the Secretary would increase by 44,630 hours in OMB
Control Number 1845-NEW1.
We estimate that over the first three-year reporting period that
there would be 591,966 graduates from these occupational training
programs. We estimate that the proposed reporting for an estimated
278,224 graduates from proprietary institutions would average 5 minutes
(.08 hours) per graduate, increasing burden by 22,258 hours. We
estimate that the proposed reporting for the estimated 29,598 graduates
from private non-profit institutions would average 5 minutes (.08
hours) per graduate, increasing burden by 2,368 hours. We estimate that
the proposed reporting for 284,144 graduates from public institutions
would average 5 minutes (.08 hours) per graduate, increasing burden by
22,732 hours.
Collectively, burden associated with the proposed disclosures
(including the reporting of Department provided median loan debt
information) for each graduate would increase for institutions by
47,358 hours in OMB Control Number 1845-NEW1.
Finally, under proposed Sec. 668.6(b) an institution would be
required to disclose on its Web site information about (1) the
occupations that its programs prepare students to enter, along with
links to occupational profiles on O*NET, (2) the on-time graduation
rate of students entering a program, (3) the cost of each program,
including costs for tuition and fees, room and board; other
institutional costs typically incurred by students enrolling in the
program, such as books and supplies, (4) beginning no later than June
30, 2013, the placement rate for students completing each of these
programs, as determined under Sec. 668.8(g) or a State-sponsored
workforce data system, and (5) the median loan debt incurred by
students who completed each program in the preceding three years,
identified separately as title IV, HEA loan debt and debt from private
educational loans and institutional financing plans.
We estimate that, on average, institutions would take 3 hours per
institution to obtain the required disclosure information and to
provide that information on the institution's Web sites. We estimate
that 2,086 proprietary institutions would take 3 hours per institution
to collect and post the proposed disclosures which would increase
burden by 6,258 hours. We estimate that 238 private non-profit
institutions would take 3 hours per institution to collect and post the
proposed disclosures which would increase burden by 714 hours. We
estimate that 2,139 public institutions would take 3 hours per
institution to collect and post the proposed disclosures which would
increase burden by 6,417 hours.
Collectively, we estimate that these proposed disclosures would
result in an increase in burden to institutions by 13,389 hours in OMB
Control Number 1845-NEW1.
In total, the proposed regulatory changes reflected in Sec. 668.6
would increase burden by a total of 105,377 hours in OMB Control Number
1845-NEW1.
Section 668.8--Eligible Program
Under proposed Sec. 668.8(l)(1), we would revise the method of
converting clock hours to credit hours to use a ratio of the minimum
clock hours in an academic year to the minimum credit hours in an
academic year, i.e., 900 clock hours to 24 semester or trimester hours
or 36 quarter hours. Thus, a semester or trimester hour would be based
on at least 37.5 clock hours, and a quarter hour would be based on at
least 25 clock hours. Proposed Sec. 668.8(l)(2) would create an
exception to the conversion ratio in proposed Sec. 668.8(l)(1) if
neither an institution's designated accrediting agency nor the relevant
State licensing authority for participation in the title IV, HEA
programs determines there are any deficiencies in the institution's
policies, procedures, and practices for establishing the credit hours
that the institution awards for programs and courses, as defined in
proposed Sec. 600.2. Under the exception provided by proposed Sec.
668.8(l)(2), an institution would be permitted to combine students'
work outside of class with the clock-hours of instruction in order to
meet or exceed the numeric requirements established in proposed Sec.
668.8(l)(1). However, under proposed Sec. 668.8(l)(2), the institution
would need to use at least 30 clock hours for a semester or trimester
hour or 20 clock hours for a quarter hour.
In determining whether there is outside work that a student must
perform, the analysis would need to take into account differences in
coursework and educational activities within the program. Some portions
of a program may require student work outside of class that justifies
the application of proposed Sec. 668.8(l)(2). In addition, the
application of proposed Sec. 668.8(l)(2) could vary within a program
depending on variances in required student work outside of class for
different portions of the program. Other portions of the program may
not have outside work, and proposed Sec. 668.8(l)(1) would need to be
applied. Of course, an institution applying only proposed Sec.
668.8(l)(1) to a program eligible for conversion from clock hours to
credit hours, without an analysis of the program's coursework, would be
considered compliant with the requirements of proposed Sec. 668.8(l).
Proposed Sec. 668.8(k)(1)(ii) would modify a provision in current
regulations to provide that a program is not subject to the conversion
formula in Sec. 668.8(l) where each course within the program is
acceptable for full credit toward a degree that is offered by the
institution and that this degree requires at least two academic years
of study. Additionally, under proposed Sec. 668.8(k)(1)(ii), the
institution would be required to demonstrate that students enroll in,
and graduate from, the degree program.
Proposed Sec. 668.8(k)(2)(i) would provide that a program is
considered to be a clock-hour program if the program must be measured
in clock hours to receive Federal or State approval or licensure, or if
completing clock hours is a requirement for graduates to apply for
licensure or the authorization to practice the occupation that the
student is intending to pursue. Under proposed Sec. 668.8(k)(2)(ii)
and (iii), the program would also be considered to be offered in clock
hours if the credit hours awarded for the program are not in compliance
with the definition of a credit hour in proposed Sec. 600.2, or if the
institution does not provide the clock hours that are the basis for the
credit hours awarded for the program or each course in the program and,
except as provided in current Sec. 668.4(e), requires attendance in
the clock hours that are the basis for the credit hours awarded. The
proposed regulations on which tentative agreement was reached would not
include the provision in proposed Sec. 668.8(k)(2)(iii) that, except
as provided in current Sec. 668.4(e), an institution must require
attendance in the clock hours
[[Page 34861]]
that are the basis for the credit hours awarded.
Proposed Sec. 668.8(k)(3) would provide that proposed Sec.
668.8(k)(2)(i) would not apply if a limited portion of the program
includes a practicum, internship, or clinical experience component that
must include a minimum number of clock hours due to a State or Federal
approval or licensure requirement.
We estimate that on average, for each affected program it would
take 30 minutes for an institution to make the determination of whether
the program is an affected program, to evaluate the amount of outside
student work that should be included as proposed and to perform the
clock hour to credit hour conversion. We further estimate that of the
4,587 institutions of higher education with less than 2-year programs,
that on average, each institution has approximately 8 non-degree
programs of study for a total of 36,696 affected programs. We estimate
that there are 16,513 affected programs at proprietary institutions
times .5 hours which would increase burden by 8,257 hours. We estimate
that there are 1,835 affected programs at private non-profit
institutions times .5 hours which would increase burden by 918 hours.
We estimate that there are 18,348 affected programs at public
institutions times .5 hours which would increase burden by 9,174 hours.
Collectively, the proposed regulatory changes reflected in Sec.
668.8 would increase burden by 18,349 hours in OMB Control Number 1845-
0022.
Section 668.16--Standards of Administrative Capability
Under the proposed regulations, the elements of the institution's
satisfactory academic progress plan would be moved from current Sec.
668.16(e) to proposed Sec. 668.34. We would also update these
provisions. As a result, the estimated burden upon institutions
associated with measuring academic progress currently in OMB Control
Number 1845-0022 of 21,000 hours would be administratively removed from
this collection and transferred to OMB Control Number 1845-NEW2.
Under proposed Sec. 668.16(p), an institution would be required to
develop and follow procedures to evaluate the validity of a student's
high school completion if the institution or the Secretary has reason
to believe that the high school diploma is not valid or was not
obtained from an entity that provides secondary school education. The
burden associated with this proposed requirement would be mitigated by
the fact that many institutions already have processes in place to
collect high school diplomas and make determinations about their
validity.
We estimate that burden would increase for each institution by 3.5
hours for the development of a high school diploma validity process. We
estimate that 2,086 proprietary institutions would on average take 3.5
hours to develop the proposed procedures to evaluate the validity of
high school completions which would increase burden by 7,301 hours. We
estimate that 1,731 private non-profit institutions would on average
take 3.5 hours to develop the proposed procedures to evaluate the
validity of high school completion which would increase burden by 6,059
hours. We estimate that 1,892 public institutions would on average take
3.5 hours to develop the proposed procedures to evaluate the validity
of high school completion which would increase burden by 6,622 hours.
Additionally, we estimate that the validity of approximately 4,000
high school diplomas per year would be questioned and, therefore,
require additional verification that is estimated to take .5 hours per
questionable diploma. We estimate that proprietary institutions would
have 2,000 questionable diplomas times .5 hours per diploma equals
1,000 hours of increased burden. We estimate that private non-profit
institutions would have 600 questionable diplomas times .5 hours per
diploma equals 300 hours of increased burden. We estimate that public
institutions would have 1,400 questionable diplomas times .5 hours per
diploma equals 700 hours of increased burden.
Collectively, the proposed regulatory changes reflected in Sec.
668.16 would increase burden by 21,982 hours in OMB Control Number
1845-0022.
Section 668.22--Treatment of Title IV, HEA Program Funds When a Student
Withdraws
The proposed changes to Sec. 668.22(a)(2) would clarify when a
student is considered to have withdrawn from a payment period or period
of enrollment. In the case of a program that is measured in credit
hours, the student would be considered to have withdrawn if he or she
does not complete all the days in the payment period or period of
enrollment that the student was scheduled to complete prior to
withdrawing. In the case of a program that is measured in clock hours,
the student would be considered to have withdrawn if he or she does not
complete all of the clock hours in the payment period or period of
enrollment that the student was scheduled to complete prior to
withdrawing.
The proposed change to Sec. 668.22(f)(2)(i) would clarify that,
for credit hour programs, in calculating the percentage of the payment
period or period of enrollment completed, it is necessary to take into
account the total number of calendar days that the student was
scheduled to complete prior to withdrawing without regard to any course
completed by the student that is less than the length of the term.
These proposed regulations would affect all programs with courses
that are less than the length of a term, including, for example, a
semester-based program that has a summer nonstandard term with two
consecutive six-week sessions within the term.
We estimate that approximately 425,075 students in term-based
programs with modules or compressed courses will withdraw prior to
completing more than 60 percent of their program of study. We estimate
that on average, the burden per individual student who withdraws prior
to the 60 percent point of their term-based program to be 45 minutes
(.75 hours) per affected individual which would increase burden for the
estimated 425,075 students by 318,806 hours in OMB Control Number 1845-
0022. Of these 425,075 withdrawals, we estimate that 50 percent of the
withdrawals (212,538) would occur at proprietary institutions and would
increase burden by 1 hour per withdrawal increasing burden by 212,538
hours. We estimate that 10 percent of the withdrawals (42,508) would
occur at private non-profit institutions and would increase burden by 1
hour per withdrawal increasing burden by 42,508 hours. We estimate that
40 percent of the withdrawals (170,029) would occur at public
institutions and would increase burden by 1 hour per withdrawal
increasing burden by 170,029 hours. Collectively, we estimate that
burden will increase by 743,881 hours in OMB Control Number 1845-0022,
of which 318,806 hours is for individuals and 425,075 hours is for
institutions.
Section 668.34--Satisfactory Progress
The proposed regulations would restructure the satisfactory
academic progress requirements. Proposed Sec. 668.16(e) (Standards of
administrative capability) would be revised to include only the
requirement that an institution establish, publish, and apply
satisfactory academic progress standards that meet the requirements of
Sec. 668.34. The remainder of current Sec. 668.16(e) would be moved
to proposed Sec. 668.34 such that it, alone, would describe all of
[[Page 34862]]
the required elements of a satisfactory academic progress policy as
well as how an institution would implement such a policy. The
references in paragraph Sec. 668.32(e) would be updated to conform the
section with the changes proposed to Sec. Sec. 668.16(e) and 668.32.
Proposed Sec. 668.34(a) would specify the elements an
institution's satisfactory academic policy must contain to be
considered a reasonable policy. Under the proposed regulations,
institutions would continue to have flexibility in establishing their
own policies; institutions that choose to measure satisfactory academic
progress more frequently than at the minimum required intervals would
have additional flexibility (see proposed Sec. 668.34(a)(3)).
All of the policy elements in the current regulations under Sec.
668.16(e) and Sec. 668.34 would be combined in proposed Sec. 668.34.
In addition, proposed Sec. 668.34(a)(5) would make explicit the
requirement that institutions specify the pace at which a student must
progress through his or her educational program to ensure that the
student will complete the program within the maximum timeframe, and
provide for measurement of a student's pace at each evaluation. Under
proposed Sec. 668.34(a)(6), institutional policies would need to
describe how a student's GPA and pace of completion are affected by
transfers of credit from other institutions. This provision would also
require institutions to count credit hours from another institution
that are accepted toward a student's educational program as both
attempted and completed hours.
Proposed Sec. 668.34(a)(7) would provide that, except as permitted
in Sec. 668.34(c) and (d), the policy requires that, at the time of
each evaluation, if the student is not making satisfactory academic
progress, the student is no longer eligible to receive the title IV,
HEA assistance.
Proposed Sec. 668.34(a)(8) would require institutions that use
``financial aid warning'' and ``financial aid probation'' statuses
(concepts that would be defined in proposed Sec. 668.34(b)) in
connection with satisfactory academic progress evaluations to describe
these statuses and how they are used in their satisfactory academic
progress policies. Proposed Sec. 668.34(a)(8)(i) would specify that a
student on financial aid warning may continue to receive assistance
under the title IV, HEA programs for one payment period despite a
determination that the student is not making satisfactory academic
progress. Financial aid warning status may be assigned without an
appeal or other action by the student. Proposed Sec. 668.34(a)(8)(ii)
would make clear that an institution with a satisfactory academic
progress policy that includes the use of the financial aid probation
status could require that a student on financial aid probation fulfill
specific terms and conditions, such as taking a reduced course load or
enrolling in specific courses.
Proposed Sec. 668.34(a)(9) would require an institution that
permits a student to appeal a determination that the student is not
making satisfactory academic progress to describe the appeal process in
its policy. The policy would need to contain specified elements.
Proposed Sec. 668.34(a)(9)(i) would require an institution to describe
how a student may re-establish his or her eligibility to receive
assistance under the title IV, HEA programs. Under proposed Sec.
668.34(a)(9)(ii), a student would be permitted to file an appeal based
on the death of a relative, an injury or illness of the student, or
other special circumstances. Under proposed Sec. 668.34(a)(9)(iii), a
student would be required to submit, as part of the appeal, information
regarding why the student failed to make satisfactory academic
progress, and what has changed in the student's situation that would
allow the student to demonstrate satisfactory academic progress at the
next evaluation.
Proposed Sec. 668.34(a)(10) would require the satisfactory
academic progress policy of an institution that does not permit
students to appeal a determination that they are not making
satisfactory academic progress to describe how a student may regain
eligibility for assistance under the title IV, HEA programs.
Proposed Sec. 668.34(a)(11) would require that an institution's
policy provide for notification to students of the results of an
evaluation that impacts the student's eligibility for title IV, HEA
program funds.
We estimate that, on average, institutions would take 3 hours per
institution to review the proposed regulations in Sec. 668.34(a) and
implement any proposed changes to insure compliance. We estimate that
2,086 proprietary institutions would take 3 hours per institution to
review and implement the proposed regulations increasing burden by
6,258 hours. We estimate that 1,731 private non-profit institutions
would take 3 hours per institution to review and implement the proposed
regulations increasing burden by 5,193 hours. We estimate that 1,892
public institutions would take 3 hours per institution to review and
implement the proposed regulations increasing burden by 5,676 hours.
Collectively, the proposed regulatory changes reflected in Sec.
668.34(a) would increase burden by 17,127 hours.
Proposed Sec. 668.34(c) and (d) would specify that an
institution's policy may provide for disbursement of title IV, HEA
program funds to a student who has not met an institution's
satisfactory academic standards in certain circumstances. Of the 17
million applicants in 2008-2009, we estimate that 90 percent (or
15,300,000 individuals) would begin attendance. We estimate that of the
15,300,000 individuals that begin attendance, that 90 percent (or
13,770,000 individuals) would persist at least through the end of the
initial payment period and therefore the institution would evaluate the
student's satisfactory academic progress consistent with the provision
of proposed Sec. 668.34. We estimate that 38 percent of the
institutions would evaluate their students at the end of each payment
period under proposed Sec. 668.34(c), therefore 13,770,000 individuals
times 38 percent equals 5,232,600 individuals that would be evaluated
more than annually. We estimate that 62 percent of institutions would
evaluate their students once per academic year under proposed Sec.
668.34(d), therefore, 13,770,000 individuals times 62 percent equals
8,537,400 individuals that would be evaluated annually.
Proposed Sec. 668.34(c) would permit an institution that measures
satisfactory academic progress at the end of each payment period to
have a policy that would permit a student who is not making
satisfactory academic progress to be placed automatically on financial
aid warning, a newly defined term. We estimate as a result, the burden
associated with an academic progress measurement at the end of each
payment period, and when required, developing an academic plan for the
student, would increase burden. We estimate that proprietary
institutions, which comprise 37 percent of the total number of
institutions of higher education, times 5,232,600 individuals equals
1,936,062 individuals at proprietary institutions that would require an
academic review more than once per academic year. 1,936,062 times an
average of 2 reviews per academic year, equals 3,872,124 satisfactory
academic progress reviews. Since these academic progress reviews are
generally highly automated, we estimate that, on average, each review
will take 1.2 minutes (.02 hours) and will increase burden by 77,442
hours. We estimate that private non-profit institutions, which comprise
30 percent of the total
[[Page 34863]]
number of institutions of higher education, times 5,232,600 individuals
equals 1,569,780 individuals at private non-profit institutions that
would require an academic review. 1,569,780 times an average of 2
reviews per academic year, equals 3,139,560 satisfactory academic
progress reviews. Since these academic progress reviews are generally
highly automated, we estimate that, on average, each review will take
1.2 minutes (.02 hours) and will increase burden by 62,791 hours. We
estimate that public institutions, which comprise 33 percent of the
total number of institutions of higher education, times 5,232,600
individuals equals 1,726,758 individuals at public institutions that
would require an academic review. 1,726,758 times an average of 2
reviews per academic year, equals 3,453,516 satisfactory academic
progress reviews. Since these academic progress reviews are generally
highly automated, we estimate that, on average, each review will take
1.2 minutes (.02 hours) and will increase burden by 69,070 hours.
Collectively, we estimate that the burden for institutions would
increase by 209,303 hours, in OMB Control Number 1845-NEW2.
As a result of the proposed satisfactory academic progress reviews
conducted by the institutions, we estimate that 7 percent of the
5,232,600 enrolled students (at institutions that review academic
progress more often than annually) or 366,282 would not successfully
achieve satisfactory academic progress and therefore the institution
would work with each student to develop an academic plan which would
increase burden for the individual and the institutions. We estimate
that under proposed Sec. 668.34(c), that 366,282 students would, on
average, take 10 minutes (.17 hours) to establish an academic plan and
re-evaluate the plan a second time within the academic year (2 times
per academic year), increasing burden to individuals by 124,536 hours.
We estimate that proprietary institutions, which comprise 37
percent of the total number of institutions of higher education, times
5,232,600 individuals equals 1,936,062 individuals at proprietary
institutions that would require the development of an academic plan as
a result of not progressing academically. 1,936,062 individuals times 7
percent (we estimate who would not academically progress), equals
135,524 individuals who would need to work with their institutions to
develop an academic plan. We estimate that each academic plan would
take, on average, 15 minutes (.25 hours) of staff time at two times
within the academic year, increasing burden by 67,762 hours.
We estimate that private non-profit institutions, which comprise 30
percent of the total number of institutions of higher education, times
5,232,600 individuals equals 1,569,780 individuals at private non-
profit institutions that would require the development of an academic
plan as a result of not progressing academically. 1,569,780 individuals
times 7 percent (we estimate who would not academically progress),
equals 109,885 individuals who would need to work with their
institutions to develop an academic plan. We estimate that each
academic plan would take, on average, 15 minutes (.25 hours) of staff
time at two times within the academic year, increasing burden by 54,943
hours.
We estimate that public institutions, which comprise 33 percent of
the total number of institutions of higher education, times 5,232,600
individuals equals 1,726,758 individuals at public institutions that
would require the development of an academic plan as a result of not
progressing academically. 1,726,758 individuals times 7 percent (we
estimate who would not academically progress), equals 120,873
individuals who would need to work with their institutions to develop
an academic plan. We estimate that each academic plan would take, on
average, 15 minutes (.25 hours) of staff time at two times within the
academic year, increasing burden by 60,437 hours.
Collectively, we estimate that the burden for institutions would
increase by 183,142 hours, in OMB Control Number 1845-NEW2.
Under proposed Sec. 668.34(d), at an institution that measures
satisfactory academic progress annually, or less frequently than at the
end of each payment period, a student who has been determined not to be
making satisfactory academic progress would be able to receive title
IV, HEA program funds only after filing an appeal and meeting one of
two conditions: (1) the institution has determined that the student
should be able to meet satisfactory progress standards after the
subsequent payment period, or (2) the institution develops an academic
plan with the student that, if followed, will ensure that the student
is able to meet the institution's satisfactory academic progress
standards by a specific point in time.
Because the proposed regulations would transfer the elements of an
institution's satisfactory academic policy from Sec. 668.16(e) to
Sec. 668.34, we are transferring the current burden estimate of 21,000
hours from the current OMB Control Number 1845-0022 to OMB Control
Number 1845-NEW2.
We estimate that proprietary institutions, which comprise 37
percent of the total number of institutions of higher education, times
8,537,400 individuals equals 3,158,838 individuals at proprietary
institutions that would require an academic review. Since the academic
progress reviews are generally highly automated, we estimate that, on
average, each review will take 1.2 minutes (.02 hours) and will
increase burden by 63,177 hours. We estimate that private non-profit
institutions, which comprise 30 percent of the total number of
institutions of higher education, times 8,537,400 individuals equals
2,561,220 individuals at private non-profit institutions that would
require an academic review. Since the academic progress reviews are
generally highly automated, we estimate that, on average, each review
will take 1.2 minutes (.02 hours) and will increase burden by 51,224
hours. We estimate that public institutions, which comprise 33 percent
of the total number of institutions of higher education, times
8,537,400 individuals equals 2,817,342 individuals at public
institutions that would require an academic review. Since the academic
progress reviews are generally highly automated, we estimate that, on
average, each review will take 1.2 minutes (.02 hours) and will
increase burden by 56,347 hours.
Collectively, we estimate that the burden for institutions would
increase by 170,748 hours, in OMB Control Number 1845-NEW2.
As a result of the proposed satisfactory academic progress reviews
conducted by the institutions, we estimate that 7 percent of the
8,537,400 enrolled students (at institutions that review academic
progress annually) or 597,618 would not successfully achieve
satisfactory academic progress and therefore the institution would work
with each student to develop an academic plan which would increase
burden for the individual and the institutions. We estimate that under
proposed Sec. 668.34(d), that 597,618 students would, on average, take
10 minutes (.17 hours) to establish an academic plan, increasing burden
to individuals by 101,595 hours.
We estimate that proprietary institutions, which comprise 37
percent of the total number of institutions of higher education, times
8,537,400 individuals equals 3,158,838 individuals at proprietary
institutions that would require the development of an academic plan as
a result of not
[[Page 34864]]
progressing academically. 3,158,838 individuals times 7 percent (we
estimate who would not academically progress), equals 211,119
individuals who would need to work with their institutions to develop
an academic plan. We estimate that each academic plan would take, on
average, 15 minutes (.25 hours) of staff time, increasing burden by
55,280 hours.
We estimate that private non-profit institutions, which comprise 30
percent of the total number of institutions of higher education, times
8,537,400 individuals equals 2,561,220 individuals at private non-
profit institutions that would require the development of an academic
plan as a result of not progressing academically. 2,561,220 individuals
times 7 percent (we estimate who would not academically progress),
equals 179,285 individuals who would need to work with their
institutions to develop an academic plan. We estimate that each
academic plan would take, on average, 15 minutes (.25 hours) of staff
time, increasing burden by 44,821 hours.
We estimate that public institutions, which comprise 33 percent of
the total number of institutions of higher education, times 8,537,400
individuals equals 2,817,342 individuals at public institutions that
would require the development of an academic plan as a result of not
progressing academically. 2,817,342 individuals times 7 percent (we
estimate who would not academically progress), equals 197,214
individuals who would need to work with their institutions to develop
an academic plan. We estimate that each academic plan would take, on
average, 15 minutes (.25 hours) of staff time, increasing burden by
49,304 hours.
Collectively, we estimate that the burden for institutions would
increase by 149,405 hours, in OMB Control Number 1845-NEW2.
In total, the proposed regulatory changes reflected in Sec. 668.34
would increase burden by a total of 955,855 hours in OMB Control Number
1845-NEW2; however when the 21,000 hours of burden currently in OMB
1845-0022 are administratively transferred from OMB 1845-0022 to OMB
1845-NEW2, the grand total of burden hours under this section would
increase to 976,855 in OMB 1845-NEW2.
Section 668.43--Institutional Information
The Department proposes to revise current Sec. 668.5(a) by
revising and redesignating paragraph (a) as paragraph (a)(1) and adding
a new paragraph (a)(2). Proposed Sec. 668.5(a)(1) would be based on
the language that is in current paragraph (a), but it would be modified
to make it consistent with the definition of an ``educational program''
in 34 CFR 600.2. Proposed new Sec. 668.5(a)(2) would specify that if a
written arrangement is between two or more eligible institutions that
are owned or controlled by the same individual, partnership, or
corporation, the institution that grants the degree or certificate must
provide more than 50 percent of the educational program. These
clarifications are also intended to ensure that the institution
enrolling the student has all necessary approvals to offer an
educational program in the format in which it is being provided, such
as through distance education when the other institution is providing
instruction under a written agreement using that method of delivery.
Proposed Sec. 668.5(c)(1) would expand the list of conditions that
would preclude an arrangement between an eligible institution and an
ineligible institution. Proposed Sec. Sec. 668.5(e) and 668.43 would
require an institution that enters into a written arrangement to
provide a description of the arrangement to enrolled and prospective
students.
We estimate that 104 proprietary institutions would enter into an
average of 1 written arrangement per institution and that, on average,
the burden associated with the proposed collection of information about
written agreements and its disclosure would take 30 minutes (.5 hours)
per arrangement, increasing burden by 52 hours. We estimate that 1,731
private non-profit institutions would enter into an average of 50
written arrangements per institution and that, on average, the burden
associated with the proposed collection of information about written
agreements and its disclosure would take 30 minutes (.5 hours) per
arrangement, increasing burden by 43,275 hours. We estimate that 1,892
public institutions would enter into an average of 25 written
arrangements per institution and that, on average, the burden
associated with the proposed collection of information about written
agreements and its disclosure would take 30 minutes (.5 hours) per
arrangement, increasing burden by 23,650 hours.
Collectively, we estimate that burden would increase for
institutions in their reporting of the details of written agreements by
66,977 hours in OMB Control Number 1845-0022.
Currently, the Department requires that an institution must make
available for review to any enrolled or prospective student upon
request, a copy of the documents describing the institution's
accreditation and its State, Federal, or tribal approval or licensing.
The Department proposes in Sec. 668.43(b) that the institution must
also provide its students or prospective students with contact
information for filing complaints with its accreditor and State
approval or licensing entity.
We estimate that of the 2,086 proprietary institutions that 1,919
(or 92 percent) would have to begin providing contact information for
filing complaints with accreditors, approval or licensing agencies. We
estimate that the other 8 percent are already providing this
information. We estimate that on average, this disclosure would take 10
minutes (.17 hours) per disclosure and increase burden to proprietary
institutions by 326 hours. We estimate that of the 1,731 private non-
profit institutions that 1,593 (or 92 percent) would have to begin
providing contact information for filing complaints with accreditors,
approval or licensing agencies. We estimate that the other 8 percent
are already providing this information. We estimate that on average,
this disclosure would take 10 minutes (.17 hours) per disclosure and
increase burden to private non-profit institutions by 271 hours. We
estimate that of the 1,892 public institutions that 1,740 (or 92
percent) would have to begin providing contact information for filing
complaints with accreditors, approval or licensing agencies. We
estimate that the other 8 percent are already providing this
information. We estimate that on average, this disclosure would take 10
minutes (.17 hours) per disclosure and increase burden to proprietary
institutions by 296 hours.
Collectively, we estimate that burden would increase for
institutions in their reporting of the contact information for filing
complaints to accreditors and approval or licensing agencies by 893
hours in OMB Control Number 1845-0022.
In total, the proposed regulatory changes reflected in Sec. 668.43
would increase burden by 67,870 hours in OMB Control Number 1845-0022.
Section 668.55--Updating Information
Proposed Sec. 668.55 would require an applicant to update all
changes in dependency status that occur throughout the award year,
including changes in the applicant's household size and the number of
those household members attending postsecondary educational
institutions. We estimate that 1,530,000 individuals would update their
household size or the number of household members attending
postsecondary educational institutions and that, on average, reporting
would take 5 minutes (.08
[[Page 34865]]
hours) per individual, increasing burden by 122,400 hours.
We estimate that proprietary institutions would receive updated
household size or the updated number of household members attending
postsecondary educational institutions from 566,100 applicants. We
estimate that each updated record would take 10 minutes (.17 hours) to
review each updated record thereby increasing burden by 96,237 hours.
We estimate that private non-profit institutions would receive updated
household size or the updated number of household members attending
postsecondary educational institutions from 459,000 applicants. We
estimate that each updated record would take 10 minutes (.17 hours) to
review each updated record thereby increasing burden by 78,030 hours.
We estimate that public institutions would receive updated household
size or the updated number of household members attending postsecondary
educational institutions from 504,900 applicants. We estimate that each
updated record would take 10 minutes (.17 hours) to review each updated
record thereby increasing burden by 85,833 hours.
Collectively, we estimate that burden would increase for
individuals and institutions in their reporting updated household size
and the updated number of household members attending postsecondary
educational institutions by 382,500 hours in OMB Control Number 1845-
0041, of which 122,400 hours is for individuals and 260,100 hours is
for institutions.
The Department also proposes changes resulting from a change in the
applicant's marital status, regardless of whether the applicant is
selected for verification. We estimate that 170,000 individuals would
update their marital status and that on average that reporting would
take 5 minutes (.08 hours) per individual, increasing burden by 13,600
hours.
We estimate that proprietary institutions would receive updated
marital status information from 62,900 applicants. We estimate that
each updated record would take 10 minutes (.17 hours) to review each
updated record thereby increasing burden by 10,693 hours. We estimate
that private non-profit institutions would receive updated marital
status information from 51,000 applicants. We estimate that each
updated record would take 10 minutes (.17 hours) to review each updated
record thereby increasing burden by 8,670 hours. We estimate that
public institutions would receive updated marital status information
from 56,100 applicants. We estimate that each updated record would take
10 minutes (.17 hours) to review each updated record thereby increasing
burden by 9,537 hours.
Collectively, we estimate that burden would increase for
individuals and institutions in their reporting updated marital status
information by 42,500 hours in OMB Control Number 1845-0041.
Proposed Sec. 668.55 would also include a number of other changes
to remove language that implements the marital status exception in the
current regulations, including removing current Sec. 668.55(a)(3) and
revising Sec. 668.55(b).
In total, the proposed regulatory changes reflected in Sec. 668.55
would increase burden by 425,005 hours in OMB Control Number 1845-0041.
Section 668.56--Information To Be Verified
The Department proposes to eliminate from the regulations the five
items that an institution currently is required to verify for all
applicants selected for verification. Instead, pursuant to proposed
Sec. 668.56(a), for each award year, the Secretary would specify in a
Federal Register notice the FAFSA information and documentation that an
institution and an applicant may be required to verify. The Department
would then specify on an individual student's SAR and ISIR what
information must be verified for that applicant.
Currently under OMB Control Number 1845-0041, there are 1,022,384
hours of burden associated with the verification regulations of which
1,010,072 hours of burden are a result of the data gathering and
submission by each individual applicant selected for verification. This
estimate was based upon the number of applicants in the 2002-2003 award
year. Since then, the number of applicants has grown significantly to
17.4 million applicants for the 2008-2009 award year, of which we would
project 5.1 million individual applicants to be selected for
verification.
The projected number of items to be verified under the proposed
regulations is expected to be reduced from the current five required
data elements to an average of three items per individual. This
projected reduction in items to be verified would result in a reduction
of burden per individual applicant. Also, as a result of collecting
information to verify applicant data on this smaller average number of
data elements (three items instead of five items), the average amount
of time for the individual applicant to review verification form
instructions, gather the data, respond on a form and submit a form and
the supporting data would decrease from the current average of 12
minutes (.20 hours) per individual to 7 minutes (.12 hours), thus
further reducing burden on the individual applicant.
For example, when we consider the estimated 5.1 million 2008-2009
applicants selected for verification at an average of 12 minutes (.20
hours) to collect and submit information, including supporting
documentation for the five required data elements (which is the
estimated amount of time that is associated with the requirements in
current Sec. 668.56(a)), the requirements in that section would yield
a total burden of 1,020,000 hours added to OMB Control Number 1845-
0041. However, under proposed Sec. 668.56(b), where the number of
verification data elements would be reduced to an average of three, the
estimated 5.1 million individuals selected for verification multiplied
by the reduced average of 7 minutes (.12 hours) would yield an increase
of 612,000 hours in burden. Therefore, with the proposed changes to
this section, we would expect the burden to be 408,000 hours less than
under the current regulations.
As a result, for OMB reporting purposes, we estimate that the
individuals, as a group, would have an increase in burden by 612,000
hours in OMB Control Number 1845-0041 (rather than 1,020,000 hours).
Section 668.57--Acceptable Documentation
We propose to make a number of technical and conforming changes
throughout Sec. 668.57. We also propose to make the following
substantive changes described in this section.
Proposed Sec. 668.57(a)(2) would allow an institution to accept,
in lieu of an income tax return or an IRS form that lists tax account
information, the electronic importation of data obtained from the IRS
into an applicant's online FAFSA.
We also propose to amend Sec. 668.57(a)(4)(ii)(A) to accurately
reflect that, upon application, the IRS grants a six-month extension
beyond the April 15 deadline rather than the four-month extension
currently stated in the regulations.
Under proposed Sec. 668.57(a)(5), an institution may require an
applicant who has been granted an extension to file his or her income
tax return to provide a copy of that tax return once it has been filed.
If the institution requires the applicant to submit the tax return,
under this proposed provision, it would need to re-verify the AGI and
taxes paid of the applicant and his or
[[Page 34866]]
her spouse or parents when the institution receives the return.
Proposed Sec. 668.57(a)(7) would clarify that an applicant's
income tax return that is signed by the preparer or stamped with the
preparer's name and address must also include the preparer's Social
Security number, Employer Identification Number or the Preparer Tax
Identification Number.
Proposed Sec. 668.57(b) and (c) would remain substantively
unchanged.
We would delete current Sec. 668.57(d) regarding acceptable
documentation for untaxed income and benefits and replace it with new
proposed Sec. 668.57(d). This new section would provide that, if an
applicant is selected to verify other information specified in an
annual Federal Register notice, the applicant must provide the
documentation specified for that information in the Federal Register
notice.
Currently under OMB Control Number 1845-0041, there are 1,022,384
hours of burden associated with the verification regulations, of which
12,312 hours are attributable to institutions of higher education to
establish their verification policies and procedures. Under proposed
Sec. 668.57, we estimate that, on average, institutions will take 7
minutes (.12 hours) per applicant selected for verification to review
and take appropriate action based upon the information provided by the
applicant, which in some cases may mean correcting applicant data or
having the applicant correct his or her data. Under current Sec.
668.57, when we consider the significant increase to 17.4 million
applicants in the 2008-2009 award year, of which 5.1 million would be
selected for verification at an average of 12 minutes (.20 hours) per
verification response received from applicants by the institutions for
review, the total increase in burden would have been 1,020,000
additional hours. However, under proposed Sec. 668.57, both the
average number of items to be verified would be reduced from five items
to three items, as well as the average amount of time to review would
decrease from 12 minutes (.20 hours) to 7 minutes (.12 hours).
Therefore, under the proposed regulations, the burden to institutions
would be 612,000 burden hours (that is, 5.1 million multiplied by 7
minutes (.12 hours))--rather than 1,020,000 burden hours (i.e., 5.1
million applicants multiplied by 12 minutes (.20 hours)). Thus, as
compared to the burden under the current regulations, using the number
of applicants from 2008-2009--17.4 million--there would be 408,000
fewer burden hours for institutions.
We estimate that for 2,086 proprietary institutions times 7 minutes
(.12 hours) equals 226,440 hours of increased burden. We estimate that
for 1,731 private non-profit institutions times 7 minutes (.12 hours)
equals 183,600 hours of increased burden. We estimate that for 1,892
public institutions times 7 minutes (.12 hours) equals 201,960 hours of
increased burden.
As a result, for OMB reporting purposes, collectively there would
be a projected increase of 612,000 hours of burden for institutions in
OMB Control Number 1845-0041.
Section 668.59--Consequences of a Change in FAFSA Information
We propose to amend Sec. 668.59 by removing all allowable
tolerances and requiring instead that an institution submit to the
Department all changes to an applicant's FAFSA information resulting
from verification for those applicants receiving assistance under any
of the subsidized student financial assistance programs (see proposed
Sec. 668.59(a)).
Under proposed Sec. 668.59(b), for the Federal Pell Grant program,
once the applicant provides the institution with the corrected SAR or
ISIR, the institution would be required to recalculate the applicant's
Federal Pell Grant and disburse any additional funds, if additional
funds are payable. If the applicant's Federal Pell Grant would be
reduced as a result of verification, the institution would be required
to eliminate any overpayment by adjusting subsequent disbursements or
reimbursing the program account by requiring the applicant to return
the overpayment or making restitution from its own funds (see proposed
Sec. 668.59(b)(2)(ii)).
Proposed Sec. 668.59(c) would provide that, for the subsidized
student financial assistance programs, excluding the Federal Pell Grant
Program, if an applicant's FAFSA information changes as a result of
verification, the institution must recalculate the applicant's EFC and
adjust the applicant's financial aid package on the basis of the EFC on
the corrected SAR or ISIR.
With the exception of minor technical edits, proposed Sec.
668.59(d), which describes the consequences of a change in an
applicant's FAFSA information, would be substantively the same as
current Sec. 668.59(d).
Finally, we would remove current Sec. 668.59(e), the provision
that requires an institution to refer to the Department unresolved
disputes over the accuracy of information provided by the applicant if
the applicant received funds on the basis of that information.
As proposed, both individuals (students) and institutions would be
making corrections to FAFSA information as a result of the verification
process. We estimate that 30 percent of the 17,000,000 applicants or
5,100,000 individuals (students) would be selected for verification. Of
those 5,100,000 individuals, students would submit, on average, 1.4
changes in FAFSA information as a result of verification for 7,140,000
changes which would take an average of 7 minutes (.12 hours) per
change, increasing burden to individuals by 856,800 hours.
We estimate that of the 5,100,000 individuals selected for
verification, that institutions would submit, on average 2.0 changes
per individual in FAFSA information as a result of verification for
10,200,000 changes. We estimate that 3,774,000 changes to FAFSA
information as a result of verification would occur at proprietary
institutions which would take an average of 7 minutes (.12 hours) per
change, increasing burden by 452,880 hours. We estimate that 3,060,000
changes to FAFSA information as a result of verification would occur at
private non-profit institutions which would take an average of 7
minutes (.12 hours) per change, increasing burden by 367,200 hours. We
estimate that 3,366,000 changes to FAFSA information as a result of
verification would occur at public institutions which would take an
average of 7 minutes (.12 hours) per change, increasing burden by
403,920 hours.
Collectively, the proposed regulatory changes reflected in Sec.
668.59 would increase for individuals and institutions by 2,080,800
hours in OMB Control Number 1845-0041.
Section 668.144--Application for Test Approval
We propose to clarify and expand the requirements in current
Sec. Sec. 668.143 and 668.144 and to include all of the requirements
for test approval in one section, proposed Sec. 668.144. Paragraphs
(a) and (b) of proposed Sec. 668.144 would describe the general
requirement for test publishers and States to submit to the Secretary
any test they wish to have approved under subpart J of part 668.
Paragraph (c) of proposed Sec. 668.144 would describe the information
that a test publisher must include with its application for approval of
a test. Paragraph (d) of proposed Sec. 668.144 would describe the
information a State must include with its application when it submits a
test to the Secretary for approval.
Proposed Sec. 668.144(c)(16) would require test publishers to
include in
[[Page 34867]]
their applications a description of their test administrator
certification process. In proposed Sec. 668.144(c)(17), we would
require test publishers to include in their applications, a description
of the test anomaly analysis the test publisher will conduct and submit
to the Secretary. Finally, proposed Sec. 668.144(c)(18) would require
test publishers to include in their applications a description of the
types of accommodations available for individuals with disabilities,
including a description of the process used to identify and report when
accommodations for individuals with disabilities were provided.
Proposed Sec. 668.144(d) would be added to describe what States
must include in their test submissions to the Secretary. While this
provision would replace the content in current Sec. 668.143, its
language would be revised to be parallel, where appropriate, to the
test publisher submission requirements in current Sec. 668.144. In
addition to paralleling most of the current requirements for test
publisher test submissions, proposed Sec. 668.144(d) would also
include the new requirements proposed to be added to the test publisher
submissions. A description of those new provisions follows:
Both test publishers and States would be required to submit a
description of their test administrator certification process that
indicates how the test publisher or State, as applicable, will
determine that a test administrator has the necessary training,
knowledge, skills, and integrity to test students in accordance with
requirements and how the test publisher or the State will determine
that the test administrator has the ability and facilities to keep its
test secure against disclosure or release (see proposed Sec.
668.144(c)(16) (test publishers) and Sec. 668.144(d)(7) (States)).
We estimate that test publishers and States would, on average, take
2.5 hours to develop its process to establish that a test administrator
has the necessary training, knowledge, skills and integrity to
administer ability-to-benefit (ATB) tests and report that process to
the Secretary. We estimate that the burden associated with 8 ATB tests
would increase for the proprietary test publishers by 20 hours.
The proposed regulations would require both test publishers and
States to submit a description of the test anomaly analysis they will
conduct that includes how they will identify potential test
irregularities and make a determination that test irregularities have
occurred; an explanation of corrective action to be taken in the event
of test irregularities; and information on when and how the Secretary,
test administrator, and institutions will be notified if a test
administrator is decertified (see proposed Sec. 668.144(c)(17) (test
publishers) and Sec. 668.144(d)(8) (States)). We estimate that test
publishers and States would, on average, take 75 hours to develop its
test anomaly process, to establish its test anomaly analysis (where it
explains its test irregularity detection process including its
decertification of test administrator process) and to establish its
reporting process to the Secretary. We estimate that the burden
associated with 8 ATB tests would increase for the proprietary test
publishers by 600 hours.
Under proposed Sec. 668.144(c)(18) and (d)(9) respectively, both
test publishers and States would be required to describe the types of
accommodations available for individuals with disabilities, and the
process for a test administrator to identify and report to the test
publisher when accommodations for individuals with disabilities were
provided. We estimate that test publishers and States would, on
average, take 1 hour to develop and describe to the Secretary the types
of accommodations available to individuals with disabilities, to
describe the process the test administrator would use to support the
identification of the disability and to develop the process to report
when accommodations would be used. We estimate that the burden
associated with 8 ATB tests would increase for the proprietary test
publishers by 8 hours.
Collectively, the proposed regulatory changes in Sec. 668.144
would increase burden for test publishers by 628 hours in OMB 1845-
0049.
Section 668.150--Agreement Between the Secretary and a Test-Publisher
or a State
Proposed Sec. 668.150 would provide that States, as well as test
publishers, must enter into agreements with the Secretary in order to
have their tests approved.
We would also revise this section to require both test publishers
and States to comply with a number of new requirements that would be
added to the agreement with the Secretary. These requirements would
include:
Requiring the test administrators that they certify to
provide them with certain information about whether they have been
decertified (see proposed Sec. 668.150(b)(2)). We estimate that 3,774
individuals (test administrators) would take, on average, 10 minutes
(.17 hours) to access, read, complete and submit the written
certification to a test publisher or State, which would increase burden
by 642 hours.
We estimate that it would take each test publisher or
State 1 hour per test submission to develop its process to obtain a
certification statement from each prospective test administrator, which
would increase burden by 8 hours. We estimate that the review of the
submitted written certifications by the test publishers or States for
the 3,774 test administrators would take, on average, 5 minutes (.08
hours) per certification form, which would increase burden by 302
hours. Immediately notifying the test administrator, the Secretary, and
institutions when the test administrator is decertified (see proposed
Sec. 668.150(b)(6)). We estimate that 1 percent of the 3,774 test
administrators would be decertified. We estimate that it would take
test publishers and States, on average, 1 hour per decertification to
provide all of the proposed notifications, which would increase burden
for proprietary test publishers by 38 hours. Reviewing test results of
tests administered by a decertified test administrator and immediately
notifying affected institutions and students (see proposed Sec.
668.150(b)(7)). We estimate that 481,763 ATB tests would be taken for
title IV, HEA purposes annually. Of the annual total of ATB tests
provided, we estimate that 1 percent will be improperly administered
and that 4,818 individuals would be contacted, which would take, on
average, 15 minutes (.25 hours) per individual. We estimate that burden
would increase by 1,205 hours. We estimate that it would take test
publishers and States, on average, 5 hours per ATB test submitted, to
develop the process to determine when ATB tests have been improperly
administered, which for 8 approved ATB tests would increase burden by
40 hours. We estimate that test publishers and States would, on
average, take 20 minutes (.33 hours) for each of the 4,818 estimated
improperly administered ATB tests to make the proposed notifications to
institutions, students and prospective students, which would increase
burden by 1,590 hours. Reporting to the Secretary if a test publisher
or the State certifies a previously decertified test administrator
after the three-year decertification period (see proposed Sec.
668.150(b)(8)). We estimate that of the 3,774 test administrators that
1 percent or 38 test administrators would be decertified. Of the 38
decertified test administrators, we estimate that 2 percent or 1
previously de-certified test administrator would be re-certified after
[[Page 34868]]
a three-year period and therefore reported to the Secretary. We
estimate the burden for test publishers for this reporting would be 1
hour. We project that it will be very rare that a decertified test
administrator will seek re-certification after the three-year
decertification period.
Providing copies of test anomaly analysis every 18 months
instead of every 3 years (see proposed Sec. 668.150(b)(13)). We
estimate that it would take test publishers or States, on average, 75
hours to conduct its test anomaly analysis and report the results to
the Secretary every 18 months as proposed. We estimate the burden on
test publishers for the submission of the 8 test anomaly analysis every
18 months would be 600 hours.
Reporting to the Secretary any credible information
indicating that a test has been compromised (see proposed Sec.
668.150(b)(15)). We estimate that 481,763 ATB tests for title IV, HEA
purposes would be given on an annual basis. Of that total number ATB
tests provided, we estimate that 482 ATB tests will be compromised. On
average, we estimate that test publishers would take 1 hour per test to
collect the credible information to make the determination that a test
would be compromised and report it to the Secretary. We estimate that
burden would increase by 482 hours. Reporting to the Office of
Inspector General of the Department of Education any credible
information indicating that a test administrator or institution may
have engaged in fraud or other criminal misconduct (see proposed Sec.
668.150(b)(16)). We estimate that 481,763 ATB tests for title IV, HEA
purposes would be given on an annual basis. Of that total number ATB
tests provided, we estimate that 482 ATB tests will be compromised. On
average, we estimate that test publishers would take 1 hour per test to
collect the credible information to make the determination that a test
would be compromised and report it to the U.S. Department of
Education's Office of the Inspector General. We estimate that burden
would increase by 482 hours.
Requiring a test administrator who provides a test to an
individual with a disability who requires an accommodation in the
test's administration to report to the test publisher or the State the
nature of the disability and the accommodations that were provided (see
proposed Sec. 668.150(b)(17)). Census data indicate that 12 percent of
the U.S. population is severely disabled. We estimate that 12 percent
of the ATB test population (481,763 ATB test takers) or 57,812 of the
ATB test takers would be individuals with disabilities that would need
accommodations for the ATB test. We estimate that it would take 5
minutes (.08 hours) to report the nature of the disability and any
accommodation that the test administrator made for the test taker,
increasing burden by 4,625 hours.
We estimate that, on average, test publishers and States would take
2 hours per ATB test to develop the process for having test
administrators report the nature of the test taker's disability and any
accommodations provided, times 8 tests would increase burden for
proprietary ATB test publishers by 16 hours.
Collectively, the proposed changes reflected in Sec. 668.150 would
increase burden by 10,031 hours in OMB Control Number 1845-0049.
Section 668.151--Administration of Tests
Proposed Sec. 668.151(g)(4), would require institutions to keep a
record of each individual who took an ATB test and the name and address
of the test administrator who administered the test and any identifier
assigned to the test administrator by the test publisher or the State.
We estimate that 481,763 ATB tests for title IV, HEA purposes would
be given on an annual basis. We estimate that proprietary institutions
would provide 36 percent of those ATB tests or 173,445 tests and that,
on average, the amount of time to record the test takers name and
address as well as the test administrators identifiers would be 5
minutes (.08 hours) per test, increasing burden by 13,876 hours. We
estimate that private non-profit institutions would provide 31 percent
of those ATB tests or 149,347 tests and that, on average, the amount of
time to record the test takers name and address as well as the test
administrators identifiers would be 5 minutes (.08 hours) per test,
increasing burden by 11,948 hours. We estimate that public institutions
would provide 33 percent of those ATB tests or 158,962 tests and that,
on average, the amount of time to record the test takers name and
address as well as the test administrators identifiers would be 5
minutes (.08 hours) per test, increasing burden by 12,717 hours.
If the individual who took the test has a disability and
is unable to be evaluated by the use of an approved ATB test, or the
individual requested or required a testing accommodation, the
institution would be required, under proposed Sec. 668.151(g)(5), to
maintain documentation of the individual's disability and of the
testing arrangements provided. Census data indicate that 12 percent of
the U.S. population is severely disabled. We estimate that 12 percent
of the ATB test population (481,763 ATB test takers) or 57,812 of the
ATB test takers would be individuals with disabilities that would need
accommodations for the ATB test. We estimate that it would take 5
minutes (.08 hours) to collect and maintain documentation of the
individual's disability and of the testing accommodations provided to
the test taker. We estimate that proprietary institutions will provide
36 percent or 20,812 tests times 5 minutes (.08 hours), increasing
burden by 1,665 hours. We estimate that private non-profit institutions
will provide 31 percent or 17,922 tests times 5 minutes (.08 hours),
increasing burden by 1,434 hours. We estimate that public institutions
will provide 33 percent or 19,078 tests times 5 minutes (.08 hours),
increasing burden by 1,526 hours. Collectively, the proposed regulatory
changes reflected in Sec. 668.151 would increase burden by 43,166
hours in OMB Control Number 1845-0049.
Section 668.152--Administration of Tests by Assessment Centers
Proposed Sec. 668.152(a) would clarify that assessment centers are
also required to comply with the provisions of Sec. 688.153
(Administration of tests for individuals whose native language is not
English or for individuals with disabilities), if applicable.
Under proposed Sec. 668.152(b)(2), assessment centers that score
tests would be required to provide copies of completed tests or lists
of test-takers' scores to the test publisher or the State, as
applicable, on a weekly basis. Under proposed Sec. 668.152(b)(2)(i)
and (b)(2)(ii), copies of completed tests or reports listing test-
takers' scores would be required to include the name and address of the
test administrator who administered the test and any identifier
assigned to the test administrator by the test publisher or the State.
We estimate that of the 3,774 ATB test administrators approximately
one-third (.3328 times 3,774) or 1,256 of the ATB test administrators
are at test assessment centers. Of the 1,256 test assessment centers,
we estimate that 18 percent or 226 test assessment centers are at
private non-profit institutions and 82 percent or 1,030 test assessment
centers are at public institutions. We estimate that 92 percent of the
ATB tests provided at test assessment centers are scored by the test
administrators and therefore, under the proposed regulations, the
institution would be required to maintain the scored ATB
[[Page 34869]]
tests, to collect and submit copies of the completed ATB tests or a
listing to the test publisher or State on a weekly basis, while the
other 8 percent will not be impacted by these proposed regulations. We
estimate that, on average, it would take 5 minutes (.08 hours) per week
for the test assessment center (institution) to collect and submit the
proposed information on a weekly basis. For 226 test assessment centers
at private non-profit institutions times 5 minutes (.08 hours) times 52
weeks per year equals 940 hours of increased burden. For the 1,030 test
assessment centers at public institutions times 5 minutes (.08 hours)
times 52 weeks per year equals 4,285 hours of increased burden.
Collectively, the proposed regulatory changes reflected in Sec.
668.152 would increase burden by 5,225 hours in OMB Control Number
1845-0049.
Section 668.164--Disbursing Funds
Under proposed Sec. 668.164(i), an institution would provide a way
for a Federal Pell Grant eligible student to obtain or purchase
required books and supplies by the seventh day of a payment period
under certain conditions. An institution would have to comply with this
requirement only if, 10 days before the beginning of the payment
period, the institution could disburse the title IV, HEA program funds
for which the student is eligible, and presuming that those funds were
disbursed, the student would have a title IV, HEA credit balance under
Sec. 668.164(e). The amount the institution would provide to the
student for books and supplies would be the lesser of the presumed
credit balance or the amount needed by the student, as determined by
the institution. In determining the amount needed by the student, the
institution could use the actual costs of books and supplies or the
allowance for books and supplies used in the student's cost of
attendance for the payment period.
We estimate that of the 6,321,678 Federal Pell Grant recipients in
the 2008-2009 award year, that approximately 30 percent or 1,896,503
would have or did have a title IV, HEA credit balance. Of that number
of Federal Pell Grant recipients, we estimate that 25 percent or
474,126 Federal Pell Grant recipients would have a presumed credit
balance 10 days prior to the beginning of the payment period, and as
proposed, that the institution would have to provide a way for those
recipients to either obtain or purchase their books and supplies within
7 days of the beginning of the payment period. We estimate that the
2,063 proprietary institutions participating in the Federal Pell Grant
program would take, on average 3 hours per institution to analyze and
make programming change needed to identify these recipients with
presumed credit balances, increasing burden by 6,189 hours.
Additionally, we estimate that proprietary institutions would be
required to disburse the presumed credit balance to 38 percent of the
474,126 at proprietary institutions (180,168 recipients) which on
average, would take 5 minutes (.08 hours) per recipient, increasing
burden by 14,414 hours. We estimate that the 1,523 private non-profit
institutions participating in the Federal Pell Grant program would
take, on average 3 hours per institution to analyze and make
programming change needed to identify these recipients with presumed
credit balances, increasing burden by 4,569 hours. Additionally, we
estimate that private non-profit institutions would be required to
disburse the presumed credit balance to 28 percent of the 474,126 at
proprietary institutions (132,755 recipients) which on average, would
take 5 minutes (.08 hours) per recipient, increasing burden by 10,620
hours. We estimate that the 1,883 public institutions participating in
the Federal Pell Grant program would take, on average 3 hours per
institution to analyze and make programming change needed to identify
these recipients with presumed credit balances, increasing burden by
5,469 hours. Additionally, we estimate that proprietary institutions
would be required to disburse the presumed credit balance to 34 percent
of the 474,126 at proprietary institutions (161,203 recipients) which
on average, would take 5 minutes (.08 hours) per recipient, increasing
burden by 12,896 hours.
Collectively, the proposed regulatory changes reflected in Sec.
668.164 would increase burden by 54,337 hours in OMB Control Number
1845-NEW3.
*NOTE: SEE PDF FILE - Collection of Information chart ommitted.
If you want to comment on the proposed information collection
requirements, please send your comments to the Office of Information
and Regulatory Affairs, OMB, Attention: Desk Officer for U.S.
Department of Education. Send these comments by e-mail toOIRA_
DOCKET@omb.eop.gov or by fax to (202) 395-6974. You may also send a
copy of these comments to the Department contact named in the ADDRESSES
section of this preamble.
We consider your comments on these proposed collections of
information in--
Deciding whether the proposed collections are necessary
for the proper performance of our functions, including whether the
information will have practical use;
Evaluating the accuracy of our estimate of the burden of
the proposed collections, including the validity of our methodology and
assumptions;
Enhancing the quality, usefulness, and clarify of the
information we collect; and
Minimizing the burden on those who must respond. This
includes exploring the use of appropriate automated, electronic,
mechanical, or other technological collection techniques or other forms
of information technology; e.g., permitting electronic submission of
responses.
OMB is required to make a decision concerning the collections of
information contained in these proposed regulations between 30 and 60
days after publication of this document in the Federal Register.
Therefore, to ensure that OMB gives your comments full consideration,
it is important that OMB receives the comments within 30 days of
publication. This does not affect the deadline for your comments to us
on the proposed regulations.
Intergovernmental Review
These programs are not subject to Executive Order 12372 and the
regulations in 34 CFR part 79.
Assessment of Educational Impact
In accordance with section 411 of the General Education Provisions
Act, 20 U.S.C. 1221e-4, the Secretary particularly requests comments on
whether these proposed regulations would require transmission of
information that any other agency or authority of the United States
gathers or makes available.
Electronic Access to This Document
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(Catalog of Federal Domestic Assistance: 84.007 FSEOG; 84.032
Federal Family Education Loan Program; 84.033 Federal Work-Study
Program; 84.037 Federal Perkins Loan Program; 84.063 Federal Pell
Grant Program; 84.069 LEAP; 84.268 William D. Ford Federal Direct
Loan Program; 84.376 ACG/SMART; 84.379 TEACH Grant Program)
List of Subjects
34 CFR Part 600
Colleges and universities, Foreign relations, Grant programs-
education, Loan programs-education, Reporting and recordkeeping
requirements, Selective Service System, Student aid, Vocational
education.
34 CFR Part 602
Colleges and universities, Reporting and recordkeeping
requirements.
34 CFR Part 603
Colleges and universities, Vocational education.
34 CFR Part 668
Administrative practice and procedure, Aliens, Colleges and
universities, Consumer protection, Grant programs--education, Loan
programs--education, Reporting and recordkeeping requirements,
Selective Service System, Student aid, Vocational education.
34 CFR Part 682
Administrative practice and procedure, Colleges and universities,
Loan programs--education, Reporting and recordkeeping requirements,
Student aid, Vocational education.
34 CFR Part 685
Administrative practice and procedure, Colleges and universities,
Loan programs--education, Reporting and recordkeeping requirements,
Student aid, Vocational education.
34 CFR Part 686
Administrative practice and procedure, Colleges and universities,
Education, Elementary and secondary education, Grant programs--
education, Reporting and recordkeeping requirements, Student aid.
34 CFR Part 690
Colleges and universities, Education of disadvantaged, Grant
programs--education, Reporting and recordkeeping requirements, Student
aid.
34 CFR Part 691
Colleges and universities, Elementary and secondary education,
Grant programs--education, Student aid.
Dated: June 8, 2010.
Arne Duncan,
Secretary of Education.
For the reasons discussed in the preamble, the Secretary proposes
to amend parts 600, 602, 603, 668, 682, 685, 686, 690, and 691 of title
34 of the Code of Federal Regulations as previously amended in the
Federal Register on October 27, 2009 (74 FR 55414) and October 29, 2009
(74 FR 55902) as follows:
PART 600--INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT
OF 1965, AS AMENDED
1. The authority citation for part 600 continues to read as
follows:
Authority: 20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b,
and 1099c, unless otherwise noted.
2. Section 600.2 is amended by:
A. Adding, in alphabetical order, the definition of a Credit hour.
[[Page 34872]]
B. Revising the definition of Recognized occupation.
The addition and revision read as follows:
Sec. 600.2 Definitions.
* * * * *
Credit hour: Except as provided in 34 CFR 668.8(k) and (l), a
credit hour is--
(1) One hour of classroom or direct faculty instruction and a
minimum of two hours of out of class student work each week for
approximately fifteen weeks for one semester or trimester hour of
credit, or ten to twelve weeks for one quarter hour of credit, or the
equivalent amount of work over a different amount of time;
(2) At least an equivalent amount of work as required in paragraph
(1) of this definition for other academic activities as established by
the institution including laboratory work, internships, practica,
studio work, and other academic work leading to the award of credit
hours; or
(3) Institutionally established reasonable equivalencies for the
amount of work required in paragraph (1) of this definition for the
credit hours awarded, including as represented in intended learning
outcomes and verified by evidence of student achievement.
* * * * *
Recognized occupation: An occupation that is--
(1) Identified by a Standard Occupational Classification (SOC) code
established by the Office of Management and Budget or an Occupational
Information Network O* NET-SOC code established by the Department of
Labor and available athttp://online.onetcenter.org or its successor
site; or
(2) Determined by the Secretary in consultation with the Secretary
of Labor to be a recognized occupation.
* * * * *
3. Section 600.4 is amended by:
A. In paragraph (a)(3), adding the words, ``in accordance with
Sec. 600.9'' immediately after the word ``located''.
B. In paragraph (a)(4)(i)(C), removing the word ``and'' that
appears after the punctuation ``;''.
C. Adding paragraph (a)(4)(iii).
The addition reads as follows:
Sec. 600.4 Institution of higher education.
(a) * * *
(4) * * *
(iii) That is at least a one academic year training program that
leads to a certificate, or other nondegree recognized credential, and
prepares students for gainful employment in a recognized occupation;
and
* * * * *
Sec. 600.5 [Amended]
4. Section 600.5(a)(4) is amended by adding the words, ``in
accordance with Sec. 600.9'' immediately after the word ``located''.
Sec. 600.6 [Amended]
5. Section 600.6(a)(3) is amended by adding the words, ``in
accordance with Sec. 600.9'' immediately after the word ``located''.
6. Section 600.9 is added to subpart A to read as follows:
Sec. 600.9 State authorization.
(a)(1) An institution described under Sec. Sec. 600.4, 600.5, and
600.6 is legally authorized by a State through a charter, license,
approval, or other document issued by an appropriate State government
agency or State entity that affirms or conveys the authority to the
institution to operate educational programs beyond secondary education,
including programs leading to a degree or certificate.
(2) An institution is considered to meet the provisions of
paragraph (a)(1) of this section if the institution is authorized to
offer educational programs beyond secondary education by the Federal
Government or, as defined in 25 U.S.C. 1802(2), an Indian tribe.
(3) An institution is considered to be legally authorized to offer
educational programs beyond secondary education if it is exempt from
State authorization as a religious institution under the State
constitution.
(b) The Secretary considers an institution to be legally authorized
by a State under paragraph (a)(1) of this section if--
(1) The authorization is given to the institution specifically to
offer programs beyond secondary education but not if the authorization
is merely of the type required to do business in the State or to
operate as an eleemosynary organization;
(2) The authorization provided to the institution is subject to
adverse action by the State; and
(3) The State has a process to review and appropriately act on
complaints concerning an institution and enforces applicable State
laws.
(Authority: 20 U.S.C. 1001 and 1002)
PART 602--THE SECRETARY'S RECOGNITION OF ACCREDITING AGENCIES
7. The authority citation for part 602 continues to read as
follows:
Authority: 20 U.S.C. 1099b, unless otherwise noted.
8. Section 602.24 is amended by adding a new paragraph (f) to read
as follows:
Sec. 602.24 Additional procedures certain institutional accreditors
must have.
* * * * *
(f) Credit-hour policies. The accrediting agency, as part of its
review of an institution for initial accreditation or preaccreditation
or renewal of accreditation, must conduct an effective review and
evaluation of the reliability and accuracy of the institution's
assignment of credit hours.
(1) The accrediting agency meets this requirement if--
(i) It reviews the institution's--
(A) Policies and procedures for determining the credit hours, as
defined in 34 CFR 600.2, that the institution awards for courses and
programs; and
(B) The application of the institution's policies and procedures to
its programs and coursework; and
(ii) Makes a reasonable determination of whether the institution's
assignment of credit hours conforms to commonly accepted practice in
higher education.
(2) In reviewing and evaluating an institution's policies and
procedures for determining credit hour assignments, an accrediting
agency may use sampling or other methods in the evaluation, sufficient
to comply with paragraph (f)(1)(i)(B) of this section.
(3) The accrediting agency must take such actions that it deems
appropriate to address any deficiencies that it identifies at an
institution as part of its reviews and evaluations under paragraph
(f)(1)(i) and (ii) of this section, as it does in relation to other
deficiencies it may identify, subject to the requirements of this part.
(4) If, following the institutional review process under this
paragraph (f), the agency finds systemic noncompliance with the
agency's policies or significant noncompliance regarding one or more
programs at the institution, the agency must promptly notify the
Secretary.
* * * * *
PART 603--SECRETARY'S RECOGNITION PROCEDURES FOR STATE AGENCIES
9. The authority citation for part 603 is revised to read as
follows:
Authority: 20 U.S.C. 1001, 1002, 1094(c)(4); 42 U.S.C. 293a(b),
38 U.S.C. 3675, unless otherwise noted.
10. Section 603.24 is amended by redesignating paragraph (c) as
paragraph (d) and adding a new paragraph (c) to read as follows:
[[Page 34873]]
Sec. 603.24 Criteria for State agencies.
* * * * *
(c) Credit-hour policies. The State agency, as part of its review
of an institution for initial approval or renewal of approval, must
conduct an effective review and evaluation of the reliability and
accuracy of the institution's assignment of credit hours.
(1) The State agency meets this requirement if--
(i) It reviews the institution's--
(A) Policies and procedures for determining the credit hours, as
defined in 34 CFR 600.2, that the institution awards for courses and
programs; and
(B) The application of the institution's policies and procedures to
its programs and coursework; and
(ii) Makes a reasonable determination of whether the institution's
assignment of credit hours conforms to commonly accepted practice in
higher education.
(2) In reviewing and evaluating an institution's policies and
procedures for determining credit hour assignments, a State agency may
use sampling or other methods in the evaluation, sufficient to comply
with paragraph (c)(1)(i)(B) of this section.
(3) The State agency must take such actions that it deems
appropriate to address any deficiencies that it identifies at an
institution as part of its reviews and evaluations under paragraph
(c)(1)(i) and (ii) of this section, as it does in relation to other
deficiencies it may identify, subject to the requirements of this part.
(4) If, following the institutional review process under this
paragraph (c), the agency finds systemic noncompliance with the
agency's policies or significant noncompliance regarding one or more
programs at the institution, the agency must promptly notify the
Secretary.
* * * * *
PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS
11. The authority citation for part 668 continues to read as
follows:
Authority: 20 U.S.C. 1001, 1002, 1003, 1070g, 1085, 1088, 1091,
1092, 1094, 1099c, and 1099c-1, unless otherwise noted.
Sec. 668.2 [Amended]
12. Section 668.2 is amended by:
A. In paragraph (a), adding, in alphabetical order, the term
``Credit hour''.
B. In paragraph (b), in the definition of Full-time student, adding
the words, ``including for a term-based program, repeating any
coursework previously taken in the program'' immediately before the
period in the second sentence.
13. Section 668.5 is amended by:
A. Revising paragraph (a).
B. Revising paragraph (c)(1).
C. In paragraph (c)(2), adding the words ``offered by the
institution that grants the degree or certificate'' after the word
``program''.
D. In paragraph (c)(3)(i), removing the words ``not more than'' and
adding the words ``or less'' after the word ``percent''.
E. In paragraph (c)(3)(ii)(A), removing the words ``not more'' and
adding, in their place, the word ``less''.
F. Adding new paragraph (e).
The addition and revisions read as follows:
Sec. 668.5 Written arrangements to provide educational programs.
(a) Written arrangements between eligible institutions. (1) Except
as provided in paragraph (a)(2) of this section, if an eligible
institution enters into a written arrangement with another eligible
institution, or with a consortium of eligible institutions, under which
the other eligible institution or consortium provides part of the
educational program to students enrolled in the first institution, the
Secretary considers that educational program to be an eligible program
if the educational program offered by the institution that grants the
degree or certificate otherwise satisfies the requirements of Sec.
668.8.
(2) If the written arrangement is between two or more eligible
institutions that are owned or controlled by the same individual,
partnership, or corporation, the Secretary considers the educational
program to be an eligible program if--
(i) The educational program offered by the institution that grants
the degree or certificate otherwise satisfies the requirements of Sec.
668.8; and
(ii) The institution that grants the degree or certificate provides
more than 50 percent of the educational program.
* * * * *
(c) * * *
(1) The ineligible institution or organization has not--
(i) Had its eligibility to participate in the title IV, HEA
programs terminated by the Secretary;
(ii) Voluntarily withdrawn from participation in the title IV, HEA
programs under a termination, show-cause, suspension, or similar type
proceeding initiated by the institution's State licensing agency,
accrediting agency, guarantor, or by the Secretary;
(iii) Had its certification to participate in the title IV, HEA
programs revoked by the Secretary;
(iv) Had its application for re-certification to participate in the
title IV, HEA programs denied by the Secretary; or
(v) Had its application for certification to participate in the
title IV, HEA programs denied by the Secretary;
* * * * *
(e) Information made available to students. If an institution
enters into a written arrangement described in paragraph (a), (b), or
(c) of this section, the institution must provide the information
described in Sec. 668.43(a)(12) to enrolled and prospective students.
* * * * *
14. Section 668.6 is added to subpart A to read as follows:
Sec. 668.6 Reporting and disclosure requirements for programs that
prepare students for gainful employment in a recognized occupation.
(a) Reporting requirements. In accordance with procedures
established by the Secretary, an institution must report annually for
each student who completes a program under Sec. 668.8(c)(3) or (d),
information that includes--
(1) Information needed to identify the student;
(2) The Classification of Instructional Program (CIP) code of the
program the student completed;
(3) The date the student completed the program; and
(4) The amounts the student received from private educational loans
and institutional financing plans.
(b) Disclosures. For each program offered by an institution under
this section, on its Web site the institution must provide prospective
students with--
(1) The occupations (by names and SOC codes) that the program
prepares students to enter, along with links to occupational profiles
on O*NET or its successor site;
(2) The on-time graduation rate for students entering the program;
(3) The cost of the program, including tuition and fees, room and
board, and other institutional costs that a typical student would incur
for enrolling in the program;
(4) Beginning no later than June 30, 2013, the placement rate for
students completing the program, as determined under Sec. 668.8(g) or
a State-sponsored workforce data system; and
(5) The median loan debt incurred by students who completed the
program during the preceding three years. The institution must identify
separately the median loan debt from title IV, HEA program loans, and
the median loan debt from private educational loans and institutional
financing plans.
(Approved by the Office of Management and Budget under control
number 1845-NEW1)
(Authority: 20 U.S.C 1001(b), 1002(b) and (c))
[[Page 34874]]
15. Section 668.8 is amended by:
A. Revising paragraph (c)(3).
B. In paragraph (d)(2)(iii), adding the words, ``as provided under
Sec. 668.6'' immediately after the word ``occupation.''
C. In paragraph (d)(3)(iii), adding the words, ``as provided under
Sec. 668.6'' immediately after the word ``occupation.''
D. Revising paragraphs (k) and (l).
The revisions read as follows:
Sec. 668.8 Eligible program.
* * * * *
(c) * * *
(3) Be at least a one-academic-year training program that leads to
a certificate, or other nondegree recognized credential, and prepares
students for gainful employment in a recognized occupation.
* * * * *
(k) Undergraduate educational program in credit hours. (1) Except
as provided in paragraph (k)(2) of this section, if an institution
offers an undergraduate educational program in credit hours, the
institution must use the formula contained in paragraph (l) of this
section to determine whether that program satisfies the requirements
contained in paragraph (c)(3) or (d) of this section, and the number of
credit hours in that educational program for purposes of the title IV,
HEA programs, unless--
(i) The program is at least two academic years in length and
provides an associate degree, a bachelor's degree, a professional
degree, or an equivalent degree as determined by the Secretary; or
(ii) Each course within the program is acceptable for full credit
toward that institution's associate degree, bachelor's degree,
professional degree, or equivalent degree as determined by the
Secretary provided that--
(A) The institution's degree requires at least two academic years
of study; and
(B) The institution demonstrates that students enroll in, and
graduate from, the degree program.
(2) A program is considered to be a clock-hour program for purposes
of the title IV, HEA programs if--
(i) Except as provided in paragraph (k)(3) of this section, a
program is required to measure student progress in clock hours when--
(A) Receiving Federal or State approval or licensure to offer the
program; or
(B) Completing clock hours is a requirement for graduates to apply
for licensure or the authorization to practice the occupation that the
student is intending to pursue;
(ii) The credit hours awarded for the program are not in compliance
with the definition of a credit hour in 34 CFR 600.2; or
(iii) The institution does not provide the clock hours that are the
basis for the credit hours awarded for the program or each course in
the program and, except as provided in Sec. 668.4(e), requires
attendance in the clock hours that are the basis for the credit hours
awarded.
(3) The requirements of paragraph (k)(2)(i) of this section do not
apply to a program if there is a State or Federal approval or licensure
requirement that a limited component of the program must include a
practicum, internship, or clinical experience component of the program
that must include a minimum number of clock hours.
(l) Formula. (1) Except as provided in paragraph (l)(2) of this
section, for purposes of determining whether a program described in
paragraph (k) of this section satisfies the requirements contained in
paragraph (c)(3) or (d) of this section, and of determining the number
of credit hours in that educational program with regard to the title
IV, HEA programs--
(i) A semester hour must include at least 37.5 clock hours of
instruction;
(ii) A trimester hour must include at least 37.5 clock hours of
instruction; and
(iii) A quarter hour must include at least 25 clock hours of
instruction.
(2) The institution's conversions to establish a minimum number of
clock hours of instruction per credit may be less than those specified
in paragraph (l)(1) of this section, if neither the institution's
designated accrediting agency nor the relevant State licensing
authority for participation in the title IV, HEA programs has
identified any deficiencies with the institution's policies and
procedures, or their implementation, for determining the credit hours,
as defined in 34 CFR 600.2, that the institution awards for programs
and courses, in accordance with 34 CFR 602.24(f), or, if applicable, 34
CFR 603.24(c), so long as--
(i) The institution's student work outside of class combined with
the clock-hours of instruction meet or exceed the numeric requirements
in paragraph (l)(1) of this section; and
(ii)(A) A semester hour must include at least 30 clock hours of
instruction;
(B) A trimester hour must include at least 30 clock hours of
instruction; and
(C) A quarter hour must include at least 20 hours of instruction.
* * * * *
16. Section 668.14 is amended by revising paragraph (b)(22) to read
as follows:
Sec. 668.14 Program participation agreement.
* * * * *
(b) * * *
(22)(i)(A) It will not provide any commission, bonus, or other
incentive payment based directly or indirectly upon success in securing
enrollments or the award of financial aid, to any person or entity who
is engaged in any student recruitment or admission activity, or in
making decisions regarding the awarding of title IV, HEA program funds.
(B) The restrictions in paragraph (b)(22) of this section do not
apply to the recruitment of foreign students residing in foreign
countries who are not eligible to receive Federal student assistance.
(ii) Eligible institutions, organizations that are contractors to
eligible institutions, and other entities may make merit-based
adjustments to employee compensation provided that such adjustments are
not based directly or indirectly upon success in securing enrollments
or the award of financial aid.
(iii) As used in paragraph (b)(22) of this section,
(A) Commission, bonus, or other incentive payment means a sum of
money or something of value paid to or given to a person or an entity
for services rendered.
(B) Securing enrollments or the awards of financial aid means
activities that a person or entity engages in for the purpose of the
admission or matriculation of students for any period of time or the
award of financial aid to students.
(1) These activities include recruitment contact in any form with a
prospective student, such as preadmission or advising activities,
scheduling an appointment to visit the enrollment office, attendance at
such appointment, or signing an enrollment agreement or financial aid
application.
(2) These activities do not include making a payment to a third
party for the provision of student contact information for prospective
students provided that such payment is not based on the number of
students who apply or enroll.
(C) Enrollment means the admission or matriculation of a student
into an eligible institution.
* * * * *
17. Section 668.16 is amended by:
A. Revising paragraph (e).
B. In paragraph (n) introductory text, removing the word ``and''
that appears after the punctuation'';''.
C. In paragraph (o)(2), removing the punctuation ``.'' and adding,
in its place, the punctuation and word ``; and''.
[[Page 34875]]
D. Adding paragraph (p).
E. Revising the OMB control number at the end of the section.
The revisions and addition read as follows:
Sec. 668.16 Standards of administrative capability.
* * * * *
(e) For purposes of determining student eligibility for assistance
under a title IV, HEA program, establishes, publishes, and applies
reasonable standards for measuring whether an otherwise eligible
student is maintaining satisfactory academic progress in his or her
educational program. The Secretary considers an institution's standards
to be reasonable if the standards are in accordance with the provisions
specified in Sec. 668.34.
* * * * *
(p) Develops and follows procedures to evaluate the validity of a
student's high school completion if the institution or the Secretary
has reason to believe that the high school diploma is not valid or was
not obtained from an entity that provides secondary school education.
(Approved by the Office of Management and Budget under control
number 1845-0022)
* * * * *
18. Section 668.22 is amended by:
A. Redesignating paragraphs (a)(2) through (a)(5) as paragraphs
(a)(3) through (a)(6), respectively.
B. Adding new paragraph (a)(2).
C. In newly redesignated paragraph (a)(5), removing the citation
``(a)(5)'' and adding, in its place, the citation ``(a)(6)''.
D. In newly redesignated paragraph (a)(6)(ii)(A)(2), removing the
citation ``(a)(5)(iii)'' and adding, in its place, the citation
``(a)(6)(iii)''.
E. In newly redesignated paragraph (a)(6)(ii)(B)(2), removing the
citation ``(a)(5)(iii)'' and adding, in its place, the citation
``(a)(6)(iii)''.
F. In newly redesignated paragraph (a)(6)(ii)(B)(3), removing the
citation ``(a)(5)(iii)'' and adding, in its place, the citation
``(a)(6)(iii)''.
G. In newly redesignated paragraph (a)(6)(iii)(A)(1), removing the
citation ``(a)(5)(ii)(A)(2)'' and adding, in its place, the citation
``(a)(6)(ii)(A)(2)''.
H. In newly redesignated paragraph (a)(6)(iii)(A)(5), removing the
citation ``(a)(5)(iii)(C)'' and adding, in its place, the citation
``(a)(6)(iii)(C)''.
I. In newly redesignated paragraph (a)(6)(iii)(B), removing the
citation ``(a)(5)(iii)(A)'' and adding, in its place, the citation
``(a)(6)(iii)(A)''.
J. In newly redesignated paragraph (a)(6)(iv), removing the
citation ``(a)(5)(iii)'' and adding, in its place, the citation
``(a)(6)(iii)''.
K. Revising paragraph (b)(3).
L. In paragraph (f)(2)(i), adding the words ``that the student,
prior to withdrawing, was scheduled to complete'' after the words
``within the period''.
The addition and revision read as follows:
Sec. 668.22 Treatment of title IV funds when a student withdraws.
* * * * *
(a) * * *
(2) A student is considered to have withdrawn from a payment period
or period of enrollment if, prior to withdrawing--
(i) In the case of a program that is measured in credit hours, the
student does not complete all the days in the payment period or period
of enrollment that the student was scheduled to complete; and
(ii) In the case of a program that is measured in clock hours, the
student does not complete all of the clock hours in the payment period
or period of enrollment that the student was scheduled to complete.
* * * * *
(b) * * *
(3)(i) An institution is required to take attendance if--
(A) An outside entity (such as the institution's accrediting agency
or a State agency) has a requirement that the institution take
attendance;
(B) The institution itself has a requirement that its instructors
take attendance; or
(C) The institution or an outside entity has a requirement that can
only be met by taking attendance or a comparable process, including,
but not limited to, requiring that students in a program demonstrate
attendance in the classes of that program, or a portion of that
program.
(ii) If, in accordance with paragraph (b)(3)(i) of this section, an
institution is required to take attendance or requires that attendance
be taken for only some students, the institution must use its
attendance records to determine a withdrawal date in accordance with
paragraph (b)(1) of this section for those students.
(iii)(A) If, in accordance with paragraph (b)(3)(i) of this
section, an institution is required to take attendance, or requires
that attendance be taken, for a limited period, the institution must
use its attendance records to determine a withdrawal date in accordance
with paragraph (b)(3)(i) of this section for that limited period.
(B) A student in attendance at the end of the limited period
identified in paragraph (b)(3)(iii)(A) of this section who subsequently
stops attending during the payment period will be treated as a student
for whom the institution was not required to take attendance.
(iv) If an institution is required to take attendance or requires
that attendance be taken, on only one specified day to meet a census
reporting requirement, the institution is not considered to take
attendance.
* * * * *
19. Section 668.32 is amended by:
A. In paragraph (e)(3), removing the word ``or'' that appears after
the punctuation ``;''.
B. In paragraph (e)(4)(ii), removing the punctuation ``.'' and
adding, in its place, the punctuation and word ``; or''.
C. Adding new paragraph (e)(5).
D. Revising paragraph (f).
The addition and revision read as follows:
Sec. 668.32 Student eligibility--general.
* * * * *
(e) * * *
(5) Has been determined by the institution to have the ability to
benefit from the education or training offered by the institution based
on the satisfactory completion of 6 semester hours, 6 trimester hours,
6 quarter hours, or 225 clock hours that are applicable toward a degree
or certificate offered by the institution.
(f) Maintains satisfactory academic progress in his or her course
of study according to the institution's published standards of
satisfactory academic progress that meet the requirements of Sec.
668.34.
* * * * *
20. Section 668.34 is revised to read as follows:
Sec. 668.34 Satisfactory academic progress.
(a) Satisfactory academic progress policy. An institution must
establish a reasonable satisfactory academic progress policy for
determining whether an otherwise eligible student is making
satisfactory academic progress in his or her educational program and
may receive assistance under the title IV, HEA programs. The Secretary
considers the institution's policy to be reasonable if--
(1) The policy is at least as strict as the policy the institution
applies to a student who is not receiving assistance under the title
IV, HEA programs;
(2) The policy provides for consistent application of standards to
all students within categories of students, e.g., full-time, part-time,
undergraduate, and graduate students, and educational programs
established by the institution;
[[Page 34876]]
(3) The policy provides that a student's academic progress is
evaluated--
(i) At the end of each payment period if the educational program is
either one academic year in length or shorter than an academic year; or
(ii) At the end of each payment period or at least annually for all
other educational programs;
(4)(i) The policy specifies the grade point average (GPA) that a
student must achieve at each evaluation, or if a GPA is not an
appropriate qualitative measure, a comparable assessment measured
against a norm; and
(ii) If a student is enrolled in an educational program of more
than two academic years, the policy specifies that at the end of the
second academic year, the student must have a GPA of at least a ``C''
or its equivalent, or have academic standing consistent with the
institution's requirements for graduation;
(5)(i) The policy specifies the pace at which a student must
progress through his or her educational program to ensure that the
student will complete the program within the maximum timeframe, as
defined in paragraph (b) of this section, and provides for measurement
of the student's progress at each evaluation; and
(ii) An institution calculates the pace at which the student is
progressing by dividing the cumulative number of hours the student has
successfully completed by the cumulative number of hours the student
has attempted. In making this calculation, the institution is not
required to include remedial courses;
(6) The policy describes how a student's GPA and pace of completion
are affected by course incompletes, withdrawals, or repetitions, or
transfers of credit from other institutions. Credit hours from another
institution that are accepted toward the student's educational program
must count as both attempted and completed hours;
(7) Except as provided in paragraphs (c) and (d) of this section,
the policy provides that, at the time of each evaluation, a student who
has not achieved the required GPA, or who is not successfully
completing his or her educational program at the required pace, is no
longer eligible to receive assistance under the title IV, HEA programs;
(8) If the institution places students on financial aid warning, or
on financial aid probation, as defined in paragraph (b) of this
section, the policy describes these statuses and that--
(i) A student on financial aid warning may continue to receive
assistance under the title IV, HEA programs for one payment period
despite a determination that the student is not making satisfactory
academic progress. Financial aid warning status may be assigned without
an appeal or other action by the student; and
(ii) A student on financial aid probation may receive title IV, HEA
program funds for one payment period. While a student is on financial
aid probation, the institution may require the student to fulfill
specific terms and conditions such as taking a reduced course load or
enrolling in specific courses. At the end of one payment period on
financial aid probation, the student must meet the institution's
satisfactory academic progress standards or meet the requirements of
the academic plan developed by the institution and the student to
qualify for further title IV, HEA program funds;
(9) If the institution permits a student to appeal a determination
by the institution that he or she is not making satisfactory academic
progress, the policy describes--
(i) How the student may re-establish his or her eligibility to
receive assistance under the title IV, HEA programs;
(ii) The basis on which a student may file an appeal: The death of
a relative, an injury or illness of the student, or other special
circumstances; and
(iii) Information the student must submit regarding why the student
failed to make satisfactory academic progress, and what has changed in
the student's situation that will allow the student to demonstrate
satisfactory academic progress at the next evaluation;
(10) If the institution does not permit a student to appeal a
determination by the institution that he or she is not making
satisfactory academic progress, the policy must describe how the
student may re-establish his or her eligibility to receive assistance
under the title IV, HEA programs; and
(11) The policy provides for notification to students of the
results of an evaluation that impacts the student's eligibility for
title IV, HEA program funds.
(b) Definitions. The following definitions apply to the terms used
in this section:
Appeal. Appeal means a process by which a student who is not
meeting the institution's satisfactory academic progress standards
petitions the institution for reconsideration of the student's
eligibility for title IV, HEA program assistance.
Financial aid probation. Financial aid probation means a status
assigned by an institution to a student who fails to make satisfactory
academic progress and who has appealed and has had eligibility for aid
reinstated.
Financial aid warning. Financial aid warning means a status
assigned to a student who fails to make satisfactory academic progress
at an institution that evaluates academic progress at the end of each
payment period.
Maximum time frame. Maximum timeframe means--
(1) For an undergraduate program measured in credit hours, a period
that is no longer than 150 percent of the published length of the
educational program, as measured in credit hours;
(2) For an undergraduate program measured in clock hours, a period
that is no longer than 150 percent of the published length of the
educational program, as measured by the cumulative number of clock
hours the student is required to complete and expressed in calendar
time; and
(3) For a graduate program, a period defined by the institution
that is based on the length of the educational program.
(c) Institutions that evaluate satisfactory academic progress at
the end of each payment period. (1) An institution that evaluates
satisfactory academic progress at the end of each payment period and
determines that a student is not making progress under its policy may
nevertheless disburse title IV, HEA program funds to the student under
the provisions of paragraph (c)(2), (c)(3), or (c)(4) of this section.
(2) For the payment period following the payment period in which
the student did not make satisfactory academic progress, the
institution may--
(i) Place the student on financial aid warning, and disburse title
IV, HEA program funds to the student; or
(ii) Place a student directly on financial aid probation, following
the procedures outlined in paragraph (d)(2) of this section and
disburse title IV, HEA program funds to the student.
(3) For the payment period following a payment period during which
a student was on financial aid warning, the institution may place the
student on financial aid probation, and disburse title IV, HEA program
funds to the student if--
(i) The institution evaluates the student's progress and determines
that student did not make satisfactory academic progress during the
payment period the student was on financial aid warning;
(ii) The student appeals the determination; and
(iii)(A) The institution determines that the student should be able
to meet
[[Page 34877]]
the institution's satisfactory academic progress standards by the end
of the subsequent payment period; or
(B) The institution develops an academic plan for the student that,
if followed, will ensure that the student is able to meet the
institution's satisfactory academic progress standards by a specific
point in time.
(4) A student on financial aid probation for a payment period may
not receive title IV, HEA program funds for the subsequent payment
period unless the student makes satisfactory academic progress or the
institution determines that the student met the requirements specified
by the institution in the academic plan for the student.
(d) Institutions that evaluate satisfactory academic progress
annually or less frequently than at the end of each payment period. (1)
An institution that evaluates satisfactory academic progress annually
or less frequently than at the end of each payment period and
determines that a student is not making progress under its policy may
nevertheless disburse title IV, HEA program funds to the student under
the provisions of paragraph (d)(2) or (d)(3) of this section.
(2) The institution may place the student on financial aid
probation and may disburse title IV, HEA program funds to the student
for the subsequent payment period if--
(i) The institution evaluates the student and determines that the
student is not making satisfactory academic progress;
(ii) The student appeals the determination; and
(iii) (A) The institution determines that the student should be
able to make satisfactory academic progress during the subsequent
payment period and meet the institution's satisfactory academic
progress standards at the end of that payment period; or
(B) The institution develops an academic plan for the student that,
if followed, will ensure that the student is able to meet the
institution's satisfactory academic progress standards by a specific
point in time.
(3) A student on financial aid probation for a payment period may
not receive title IV, HEA program funds for the subsequent payment
period unless the student makes satisfactory academic progress or the
institution determines that the student met the requirements specified
by the institution in the academic plan for the student.
(Authority: 20 U.S.C. 1091(d))
21. Section 668.43 is amended by:
A. In paragraph (a)(10)(ii), removing the word ``and'' that appears
after the punctuation ``;''.
B. In paragraph (a)(11)(ii), removing the punctuation ``.'' and
adding, in its place, the punctuation and word ``; and''.
C. Adding paragraph (a)(12).
D. Revising paragraph (b).
The addition and revision read as follows:
Sec. 668.43 Institutional information.
(a) * * *
(12) A description of written arrangements the institution has
entered into in accordance with Sec. 668.5, including, but not limited
to, information on--
(i) The portion of the educational program that the institution
that grants the degree or certificate is not providing;
(ii) The name and location of the other institutions or
organizations that are providing the portion of the educational program
that the institution that grants the degree or certificate is not
providing;
(iii) The method of delivery of the portion of the educational
program that the institution that grants the degree or certificate is
not providing; and
(iv) Estimated additional costs students may incur as the result of
enrolling in an educational program that is provided, in part, under
the written arrangement.
(b) The institution must make available for review to any enrolled
or prospective student upon request, a copy of the documents describing
the institution's accreditation and its State, Federal, or tribal
approval or licensing. The institution must also provide its students
or prospective students with contact information for filing complaints
with its accreditor and State approval or licensing entity.
* * * * *
22. Subpart E of part 668 is revised to read as follows:
Subpart E--Verification and Updating of Student Aid Application
Information
Sec.
668.51 General.
668.52 Definitions.
668.53 Policies and procedures.
668.54 Selection of an applicant's FAFSA information for
verification.
668.55 Updating information.
668.56 Information to be verified.
668.57 Acceptable documentation.
668.58 Interim disbursements.
668.59 Consequences of a change in an applicant's FAFSA information.
668.60 Deadlines for submitting documentation and the consequences
of failing to provide documentation.
668.61 Recovery of funds.
Subpart E--Verification and Updating of Student Aid Application
Information
Sec. 668.51 General.
(a) Scope and purpose. The regulations in this subpart govern the
verification by institutions of information submitted by applicants for
student financial assistance under the subsidized student financial
assistance programs.
(b) Applicant responsibility. If the Secretary or the institution
requests documents or information from an applicant under this subpart,
the applicant must provide the specified documents or information.
(c) Foreign schools. The Secretary exempts from the provisions of
this subpart participating institutions that are not located in a
State.
(Authority: 20 U.S.C. 1094)
Sec. 668.52 Definitions.
The following definitions apply to this subpart:
Free Application for Federal Student Aid (FAFSA): The student aid
application provided for under section 483, of the HEA, which is used
to determine a student's eligibility for the title IV, HEA programs.
Institutional Student Information Record (ISIR): An electronic
record the Secretary transmits to an institution, for purposes of the
title IV, HEA programs, that includes an applicant's--
(1) Personal identification information;
(2) FAFSA information used to determine eligibility for title IV,
HEA program aid; and
(3) EFC.
Specified year: (1) The calendar year preceding the first calendar
year of an award year, i.e., the base year; or
(2) The year preceding the year described in paragraph (1) of this
definition.
Student Aid Report (SAR): A report provided to an applicant by the
Secretary showing the amount of his or her EFC.
Subsidized student financial assistance programs: Title IV, HEA
programs for which eligibility is determined on the basis of a
student's EFC. These programs include the Federal Pell Grant, Federal
Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study
(FWS), Federal Perkins Loan, Subsidized Stafford Loan and Direct
Subsidized Loan programs.
Unsubsidized student financial assistance programs: Title IV, HEA
programs for which eligibility is not based on a student's EFC. These
programs include the Teacher Education
[[Page 34878]]
Assistance for College and Higher Education (TEACH) Grant, Unsubsidized
Stafford Loan, Direct Unsubsidized Loan, Federal PLUS Loan, and Direct
Parent Loan for Undergraduate Students (Direct PLUS Loan) programs.
(Authority: 20 U.S.C. 1094)
Sec. 668.53 Policies and procedures.
(a) An institution must establish and use written policies and
procedures for verifying an applicant's FAFSA information in accordance
with the provisions of this subpart. These policies and procedures must
include--
(1) The time period within which an applicant must provide any
documentation requested by the institution in accordance with Sec.
668.57;
(2) The consequences of an applicant's failure to provide the
requested documentation within the specified time period;
(3) The method by which the institution notifies an applicant of
the results of its verification if, as a result of verification, the
applicant's EFC changes and results in a change in the amount of the
applicant's assistance under the title IV, HEA programs;
(4) The procedures the institution will take itself or the
procedures the institution will require an applicant to follow to
correct his or her FAFSA information determined to be in error; and
(5)(a) The procedures for making referrals under Sec. 668.16(g).
(b) An institution's procedures must provide that it will furnish,
in a timely manner, to each applicant whose FAFSA information is
selected for verification a clear explanation of--
(1) The documentation needed to satisfy the verification
requirements; and
(2) The applicant's responsibilities with respect to the
verification of his or her FAFSA information, including the deadlines
for completing any actions required under this subpart and the
consequences of failing to complete any required action.
(c) An institution's procedures must provide that an applicant
whose FAFSA information is selected for verification by the Secretary
is required to complete verification before the institution exercises
any authority under section 479A(a) of the HEA to make changes to the
applicant's cost of attendance or to the values of the data items
required to calculate the EFC.
(Approved by the Office of Management and Budget under control
number 1845-0041)
(Authority: 20 U.S.C. 1094)
Sec. 668.54 Selection of an applicant's FAFSA information for
verification.
(a) General requirements. (1) Except as provided in paragraph (b)
of this section, an institution must require an applicant whose FAFSA
information is selected for verification by the Secretary, to verify
the information specified by the Secretary pursuant to Sec. 668.56.
(2) If an institution has reason to believe that an applicant's
FAFSA information is inaccurate, it must verify the accuracy of that
information.
(3) An institution may require an applicant to verify any FAFSA
information that it specifies.
(b) Exclusions from verification. (1) An institution need not
verify an applicant's FAFSA information if--
(i) The applicant dies;
(ii) The applicant does not receive assistance under the title IV,
HEA programs for reasons other than failure to verify his or her FAFSA
information;
(iii) The applicant receives only unsubsidized student financial
assistance; or
(iv) The applicant who transfers to the institution, had previously
completed verification at the institution from which he or she
transferred, and applies for assistance based on the same FAFSA
information used at the previous institution, if the current
institution obtains a letter from the previous institution--
(A) Stating that it has verified the applicant's information; and
(B) Providing the transaction number of the applicable ISIR.
(2) Unless the institution has reason to believe that the
information reported by a dependent applicant is incorrect, it need not
verify the applicant's parents' FAFSA information if--
(i) The parents are residing in a country other than the United
States and cannot be contacted by normal means of communication;
(ii) The parents cannot be located because their contact
information is unknown and cannot be obtained by the applicant; or
(iii) Both of the applicant's parents are mentally incapacitated.
(3) Unless the institution has reason to believe that the
information reported by an independent applicant is incorrect, it need
not verify the applicant's spouse's information if--
(i) The spouse is deceased;
(ii) The spouse is mentally incapacitated;
(iii) The spouse is residing in a country other than the United
States and cannot be contacted by normal means of communication; or
(iv) The spouse cannot be located because his or her contact
information is unknown and cannot be obtained by the applicant.
(Approved by the Office of Management and Budget under control
number 1845-0041)
(Authority: 20 U.S.C. 1091, 1094)
Sec. 668.55 Updating information.
(a)(1) Unless the provisions of paragraph (a)(2) of this section
apply, an applicant is required to update--
(i) The number of family members in the applicant's household and
the number of those household members attending postsecondary
educational institutions, in accordance with provisions of paragraph
(b) of this section; and
(ii) The applicant's dependency status in accordance with the
provisions of paragraph (c) of this section.
(2) An institution need not require an applicant to verify the
information contained in his or her FAFSA for an award year if--
(i) The applicant updated and verified the FAFSA information on an
earlier transaction; and
(ii) No change in the information to be updated has taken place
since the last update.
(b) If the number of family members in the applicant's household or
the number of those household members attending postsecondary
educational institutions changes, an applicant who is selected for
verification must update his or her FAFSA information regarding those
data items so that the information is correct as of the date the
applicant verifies the information.
(c) If an applicant's dependency status changes during an award
year, the applicant must update his or her FAFSA information so that
the information is correct regardless of whether the applicant is
selected for verification.
(Approved by the Office of Management and Budget under control
number 1845-0041)
(Authority: 20 U.S.C. 1094)
Sec. 668.56 Information to be verified.
(a) For each award year the Secretary publishes in the Federal
Register notice the FAFSA information that an institution and an
applicant may be required to verify.
(b) For each applicant whose FAFSA information is selected for
verification by the Secretary, the Secretary specifies the specific
information under paragraph (a) of this section that the applicant must
verify.
(Approved by the Office of Management and Budget under control
number 1845-0041)
(Authority: 20 U.S.C. 1094, 1095)
[[Page 34879]]
Sec. 668.57 Acceptable documentation.
If an applicant is selected to verify any of the following
information, an institution must obtain the specified documentation.
(a) Adjusted Gross Income (AGI), income earned from work, or U.S.
income tax paid. (1) Except as provided in paragraphs (a)(2), (a)(3),
and (a)(4) of this section, an institution must require an applicant
selected for verification of AGI, income earned from work or U.S.
income tax paid to submit to it--
(i) A copy of the income tax return or an Internal Revenue Service
(IRS) form which that lists tax account information of the applicant,
his or her spouse, or his or her parents, as applicable. The copy of
the return must include the signature (which need not be an original)
of the filer of the return or of one of the filers of a joint return;
(ii) For a dependent student, a copy of each IRS Form W-2 received
by the parent whose income is being taken into account if--
(A) The parents filed a joint return; and
(B) The parents are divorced or separated or one of the parents has
died; and
(iii) For an independent student, a copy of each IRS Form W-2 he or
she received if the independent student--
(A) Filed a joint return; and
(B) Is a widow or widower, or is divorced or separated.
(2) An institution may accept, in lieu of an income tax return or
an IRS form that lists tax account information, the information
reported for an item on the applicant's FAFSA if the Secretary has
identified that item as having been obtained from the IRS.
(3) An institution must accept, in lieu of an income tax return or
an IRS form that lists tax account information, the documentation set
forth in paragraph (a)(4) of this section if the individual for the
specified year--
(i) Has not filed and, under IRS rules, or other applicable
government agency rules, is not required to file an income tax return;
(ii) Is required to file a U.S. tax return and has been granted a
filing extension by the IRS; or
(iii) Has requested a copy of the tax return or an IRS form that
lists tax account information, and the IRS or a government of a U.S.
territory or commonwealth or a foreign central government cannot locate
the return or provide an IRS form that lists tax account information.
(4) An institution must accept--
(i) For an individual described in paragraph (a)(3)(i) of this
section, a statement signed by that individual certifying that he or
she has not filed and is not required to file an income tax return for
the specified year and certifying for that year that individual's--
(A) Sources of income earned from work as stated on the FAFSA; and
(B) Amounts of income from each source. In lieu of a certification
of these amounts of income, the student may provide a copy of his or
her IRS Form W-2 for each source listed under paragraph (a)(4)(i)(A) of
this section;
(ii) For an individual described in paragraph (a)(3)(ii) of this
section--
(A) A copy of the IRS Form 4868, ``Application for Automatic
Extension of Time to File U.S. Individual Income Tax Return,'' that the
individual filed with the IRS for the specified year, or a copy of the
IRS's approval of an extension beyond the automatic six-month extension
if the individual requested an additional extension of the filing time;
and
(B) A copy of each IRS Form W-2 that the individual received for
the specified year, or for a self-employed individual, a statement
signed by the individual certifying the amount of the AGI for the
specified year; and
(iii) For an individual described in paragraph (a)(3)(iii) of this
section--
(A) A copy of each IRS Form W-2 that the individual received for
the specified year; or
(B) For an individual who is self-employed or has filed an income
tax return with a government of a U.S. territory or commonwealth, or a
foreign central government, a statement signed by the individual
certifying the amount of AGI for the specified year.
(5) An institution may require an individual described in paragraph
(a)(3)(ii) of this section to provide to it a copy of his or her
completed and signed income tax return when filed. If an institution
receives the copy of the return, it must reverify the AGI and taxes
paid by the applicant and his or her spouse or parents.
(6) If an individual who is required to submit an IRS Form W-2,
under paragraph (a) of this section, is unable to obtain one in a
timely manner, the institution may permit that individual to set forth,
in a statement signed by the individual, the amount of income earned
from work, the source of that income, and the reason that the IRS Form
W-2 is not available in a timely manner.
(7) For the purpose of this section, an institution may accept in
lieu of a copy of an income tax return signed by the filer of the
return or one of the filers of a joint return, a copy of the filer's
return that includes the preparer's Social Security Number, Employer
Identification Number or the Preparer Tax Identification Number and has
been signed by the preparer of the return or stamped with the name and
address of the preparer of the return.
(b) Number of family members in household. An institution must
require an applicant selected for verification of the number of family
members in the household to submit to it a statement signed by both the
applicant and one of the applicant's parents if the applicant is a
dependent student, or only the applicant if the applicant is an
independent student, listing the name and age of each family member in
the household and the relationship of that household member to the
applicant.
(c) Number of family household members enrolled in eligible
postsecondary institutions. (1) An institution must require an
applicant selected for verification of the number of household members
in the applicant's family enrolled on at least a half-time basis in
eligible postsecondary institutions to submit a statement signed by
both the applicant and one of the applicant's parents, if the applicant
is a dependent student, or by only the applicant if the applicant is an
independent student, listing--
(i) The name of each family member who is or will be attending an
eligible postsecondary educational institution as at least a half-time
student in the award year;
(ii) The age of each student; and
(iii) The name of the institution that each student is or will be
attending.
(2) If the institution has reason to believe that an applicant's
FAFSA information or the statement provided under paragraph (c)(1) of
this section regarding the number of family household members enrolled
in eligible postsecondary institutions is inaccurate, the institution
must obtain a statement from each institution named by the applicant in
response to the requirement of paragraph (c)(1)(iii) of this section
that the household member in question is or will be attending the
institution on at least a half-time basis, unless--
(i) The institution the student is attending determines that such a
statement is not available because the household member in question has
not yet registered at the institution he or she plans to attend; or
(ii) The institution has information indicating that the student
will be attending the same institution as the applicant.
(d) Other information. If an applicant is selected to verify other
information specified in the annual Federal Register notice, the
applicant must provide the
[[Page 34880]]
documentation specified for that information in the Federal Register
notice.
(Approved by the Office of Management and Budget under control
number 1845-0041)
(Authority: 20 U.S.C. 1094)
Sec. 668.58 Interim disbursements.
(a)(1) If an institution has reason to believe that an applicant's
FAFSA information is inaccurate, until the information is verified and
any corrections are made, the institution may not--
(i) Disburse any Federal Pell Grant, FSEOG, or Federal Perkins Loan
Program funds to the applicant;
(ii) Employ or allow an employer to employ the applicant in its FWS
Program; or
(iii) Certify a Subsidized Stafford Loan or originate a Direct
Subsidized Loan, or disburse any such loan proceeds for any previously
certified Subsidized Stafford Loan or originated Direct Subsidized Loan
to the applicant.
(2) If an institution does not have reason to believe that an
applicant's FAFSA information is inaccurate prior to verification, the
institution may--
(i)(A) Withhold payment of Federal Pell Grant, Federal Perkins
Loan, or FSEOG Program funds for the applicant; or
(B) Make one disbursement from each of the Federal Pell Grant,
Federal Perkins Loan, or FSEOG Program funds for the applicant's first
payment period of the award year;
(ii) Employ or allow an employer to employ that applicant, once he
or she is an eligible student, under the FWS Program for the first 60
consecutive days after the student's enrollment in that award year; or
(iii)(A) Withhold certification of the applicant's Subsidized
Stafford Loan application or origination of the applicant's Direct
Subsidized Loan; or
(B) Certify the Subsidized Stafford Loan application or originate
the Direct Subsidized Loan provided that the institution does not
disburse Subsidized Stafford Loan or Direct Subsidized Loan proceeds.
(3) If, after verification, an institution determines that changes
to an applicant's information will not change the amount the applicant
would receive under a title IV, HEA program, the institution--
(i) Must ensure corrections are made; and
(ii) May--
(A) Make one disbursement from each of the Federal Pell Grant,
Federal Perkins Loan, or FSEOG Program funds for the applicant's first
payment period of the award year;
(B) Employ or allow an employer to employ the applicant, once he or
she is an eligible student, under the FWS Program for the first 60
consecutive days after the student's enrollment in that award year; or
(C) Certify the Subsidized Stafford Loan application or originate
the Direct Subsidized Loan and disburse the Subsidized Stafford Loan or
Direct Subsidized Loan proceeds for the applicant.
(b) If an institution chooses to make a disbursement under
paragraph (a)(2)(i)(B) or (a)(2)(iii)(B) of this section, it is liable
for any overpayment discovered resulting from verification to the
extent that the overpayment is not recovered through reducing
subsequent disbursements in the award year.
(Authority: 20 U.S.C. 1094)
Sec. 668.59 Consequences of a change in an applicant's FAFSA
information.
(a) For the subsidized student financial assistance programs, if an
applicant's FAFSA information changes as a result of verification, the
applicant or the institution must submit the changes to the Secretary.
(b) For the Federal Pell Grant Program an institution must--
(1) Recalculate the applicant's Federal Pell Grant on the basis of
the EFC on the corrected SAR or ISIR; and
(2)(i) Disburse any additional funds under that award only if the
institution receives a corrected SAR or ISIR for the student and only
to the extent that additional funds are payable based on the
recalculation; or
(ii) Comply with the procedures specified in Sec. 668.61(a) if, as
a result of verification, the Federal Pell Grant award is reduced.
(c) For the subsidized student financial assistance programs,
excluding the Federal Pell Grant Program, if an applicant's FAFSA
information changes as a result of verification, the institution must--
(1) Recalculate the applicant's EFC; and
(2) Adjust the applicant's financial aid package on the basis of
the EFC on the corrected SAR or ISIR.
(d)(1) If an applicant is selected for verification for an award
year for which the applicant previously received a Direct Subsidized
Loan, and as a result of verification the loan amount is reduced, the
institution must comply with the procedures specified in Sec. Sec.
668.61(b)(2) and 34 CFR 685.303(e).
(2) If an applicant is selected for verification for an award year
for which the applicant previously received a Subsidized Stafford Loan,
and as a result of verification the loan amount is reduced, the
institution must comply with the procedures for notifying the borrower
and lender specified in Sec. Sec. 668.61(b)(1) and 34 CFR 682.604(h).
(Approved by the Office of Management and Budget under control
number 1845-0041)
(Authority: 20 U.S.C. 1094)
Sec. 668.60 Deadlines for submitting documentation and the
consequences of failing to provide documentation.
(a) An institution must require an applicant selected for
verification to submit to it, within the period of time it or the
Secretary specifies, the documentation set forth in Sec. 668.57 that
is requested by the institution.
(b) For purposes of the subsidized student financial assistance
programs, excluding the Federal Pell Grant Program--
(1) If an applicant fails to provide the requested documentation
within a reasonable time period established by the institution--
(i) The institution may not--
(A) Disburse any additional Federal Perkins Loan or FSEOG Program
funds to the applicant;
(B) Employ, continue to employ or allow an employer to employ the
applicant under FWS; or
(C) Certify the applicant's Subsidized Stafford Loan application or
originate the applicant's Direct Subsidized Loan or disburse any
additional Subsidized Stafford Loan or Direct Subsidized Loan proceeds
for the applicant; and
(ii) The applicant must repay to the institution any Federal
Perkins Loan or FSEOG received for that award year;
(2) If the applicant provides the requested documentation after the
time period established by the institution, the institution may, at its
option, disburse aid to the applicant notwithstanding paragraph (b)(1)
of this section; and
(3) If an institution has received proceeds for a Subsidized
Stafford Loan or Direct Subsidized Loan on behalf of an applicant, the
institution must follow the cash management procedures provided in
Sec. Sec. 668.166(a), (b), or 668.167(c), respectively, and return the
proceeds to the lender, or to the Secretary, in the case of a Direct
Subsidized Loan, if the applicant does not complete verification within
the time period specified.
(c) For purposes of the Federal Pell Grant Program--
(1) An applicant may submit a valid SAR to the institution or the
institution may receive a valid ISIR after the applicable deadline
specified in 34 CFR 690.61 but within an established additional time
period set by the Secretary through publication of a notice in the
Federal Register; and
[[Page 34881]]
(2) If the applicant does not provide to the institution the
requested documentation and, if necessary, a valid SAR or the
institution does not receive a valid ISIR, within the additional time
period referenced in paragraph (c)(1) of this section, the applicant--
(i) Forfeits the Federal Pell Grant for the award year; and
(ii) Must return any Federal Pell Grant payments previously
received for that award year.
(d) The Secretary may determine not to process FAFSA information of
an applicant who has been requested to provide documentation until the
applicant provides the documentation or the Secretary decides that
there is no longer a need for the documentation.
(e) If an applicant selected for verification for an award year
dies before the deadline for completing verification without completing
that process, the institution may not--
(1) Make any further disbursements on behalf of that applicant;
(2) Certify that applicant's Subsidized Stafford Loan application,
originate that applicant's Direct Subsidized Loan, or disburse that
applicant's Subsidized Stafford Loan or Direct Subsidized Loan
proceeds; or
(3) Consider any funds it disbursed to that applicant under Sec.
668.58(a)(2) as an overpayment.
(Authority: 20 U.S.C. 1094)
Sec. 668.61 Recovery of funds.
(a) If an institution discovers, as a result of verification, that
an applicant received more financial aid than the applicant was
eligible to receive, including an interim disbursement under Sec.
668.58(a)(2)(ii)(A) and (a)(2)(ii)(B), the institution must eliminate
the overpayment by--
(1) Adjusting subsequent disbursements in the award year in which
the overpayment occurred; or
(2) Reimbursing the appropriate program account by--
(i) Requiring the applicant to return the overpayment to the
institution if the institution cannot correct the overpayment under
paragraph (a)(1) of this section; or
(ii) Making restitution from its own funds, by the earlier of the
following dates, if the applicant does not return the overpayment:
(A) Sixty days after the applicant's last day of attendance.
(B) The last day of the award year in which the institution
disbursed Federal Pell Grant, Federal Perkins Loan, or FSEOG Program
funds to the applicant.
(b)(1) If the institution determines as a result of verification
that an applicant received Subsidized Stafford Loan proceeds for an
award year in excess of the student's financial need for the loan, the
institution must withhold and promptly return to the lender any
disbursement not yet delivered to the student that exceeds the amount
of assistance for which the student is eligible, taking into account
other financial aid received by the student. However, instead of
returning the entire undelivered disbursement, the school may choose to
return promptly to the lender only the portion of the disbursement for
which the student is ineligible. In either case, the institution must
provide the lender with a written statement describing the reason for
the returned loan funds.
(2) If the institution determines as a result of verification that
a student received Direct Subsidized Loan proceeds for an award year in
excess of the student's need for the loan, the institution must reduce
or cancel one or more subsequent disbursements to eliminate the amount
in excess of the student's need.
(c) If an institution disbursed subsidized student financial
assistance to an applicant under Sec. 668.58(a)(3), and did not
receive the SAR or ISIR reflecting corrections within the deadlines
established under Sec. 668.60, the institution must reimburse the
program account by making restitution from its own funds.
(Approved by the Office of Management and Budget under control
number 1845-0041)
(Authority: 20 U.S.C. 1094)
23. Subpart F of part 668 is revised to read as follows:
Subpart F--Misrepresentation
Sec.
668.71 Scope and special definitions.
668.72 Nature of educational program.
668.73 Nature of financial charges.
668.74 Employability of graduates.
668.75 Relationship with the Department of Education.
Subpart F--Misrepresentation
Sec. 668.71 Scope and special definitions.
(a) If the Secretary determines that an eligible institution has
engaged in substantial misrepresentation, the Secretary may--
(1) Revoke the eligible institution's program participation
agreement;
(2) Impose limitations on the institution's participation in the
title IV, HEA programs;
(3) Deny participation applications made on behalf of the
institution; or
(4) Initiate a proceeding against the eligible institution under
subpart G of this part.
(b) This subpart establishes the types of activities that
constitute substantial misrepresentation by an eligible institution. An
eligible institution is deemed to have engaged in substantial
misrepresentation when the institution itself, one of its
representatives, or any ineligible institution, organization, or person
with whom the eligible institution has an agreement, makes a
substantial misrepresentation regarding the eligible institution,
including about the nature of its educational program, its financial
charges, or the employability of its graduates. Substantial
misrepresentations are prohibited in all forms, including those made in
any advertising, promotional materials, or in the marketing or sale of
courses or programs of instruction offered by the institution.
(c) The following definitions apply to this subpart:
Misrepresentation: Any false, erroneous or misleading statement an
eligible institution, one of its representatives, or any ineligible
institution, organization, or person with whom the eligible institution
has an agreement makes directly or indirectly to a student, prospective
student or any member of the public, or to an accrediting agency, to a
State agency, or to the Secretary. A misleading statement includes any
statement that has the capacity, likelihood or tendency to deceive or
confuse. A statement is any communication made in writing, visually,
orally, or through other means. Misrepresentation includes the
dissemination of a student endorsement or testimonial that a student
gives either under duress or because the institution required the
student to make such an endorsement or testimonial to participate in a
program.
Prospective student: Any individual who has contacted an eligible
institution for the purpose of requesting information about enrolling
at the institution or who has been contacted directly by the
institution or indirectly through advertising about enrolling at the
institution.
Substantial misrepresentation: Any misrepresentation on which the
person to whom it was made could reasonably be expected to rely, or has
reasonably relied, to that person's detriment.
(Authority: 20 U.S.C. 1094)
Sec. 668.72 Nature of educational program.
Misrepresentation concerning the nature of an eligible
institution's educational program includes, but is not limited to,
false, erroneous or misleading statements concerning--
(a) The particular type(s), specific source(s), nature and extent
of its institutional, programmatic, or specialized accreditation;
[[Page 34882]]
(b)(1) Whether a student may transfer course credits earned at the
institution to any other institution;
(2) Conditions under which the institution will accept transfer
credits earned at another institution;
(c) Whether successful completion of a course of instruction
qualifies a student--
(1) For acceptance to a labor union or similar organization; or
(2) To receive, to apply to take or to take the examination
required to receive, a local, State, or Federal license, or a non-
governmental certification required as a precondition for employment,
or to perform certain functions in the State in which the program or
institution is located, or to meet additional conditions that the
institution knows or reasonably should know are generally needed to
secure employment in a recognized occupation for which the program is
represented to prepare students;
(d) The requirements for successfully completing the course of
study or program and the circumstances that would constitute grounds
for terminating the student's enrollment;
(e) Whether its courses are recommended or have been the subject of
unsolicited testimonials or endorsements by--
(1) Vocational counselors, high schools, colleges, educational
organizations, employment agencies, members of a particular industry,
students, former students, or others; or
(2) Governmental officials for governmental employment;
(f) Its size, location, facilities, or equipment;
(g) The availability, frequency, and appropriateness of its courses
and programs to the employment objectives that it states its programs
are designed to meet;
(h) The nature, age, and availability of its training devices or
equipment and their appropriateness to the employment objectives that
it states its programs and courses are designed to meet;
(i) The number, availability, and qualifications, including the
training and experience, of its faculty and other personnel;
(j) The availability of part-time employment or other forms of
financial assistance;
(k) The nature and availability of any tutorial or specialized
instruction, guidance and counseling, or other supplementary assistance
it will provide its students before, during or after the completion of
a course;
(l) The nature or extent of any prerequisites established for
enrollment in any course;
(m) The subject matter, content of the course of study, or any
other fact related to the degree, diploma, certificate of completion,
or any similar document that the student is to be, or is, awarded upon
completion of the course of study;
(n) Whether the academic, professional, or occupational degree that
the institution will confer upon completion of the course of study has
been authorized by the appropriate State educational agency. This type
of misrepresentation includes, in the case of a degree that has not
been authorized by the appropriate State educational agency, any
failure by an eligible institution to disclose this fact in any
advertising or promotional materials that reference such degree; or
(o) Any matters required to be disclosed to prospective students
under Sec. Sec. 668.42 and 668.43 of this part.
(Authority: 20 U.S.C. 1094)
Sec. 668.73 Nature of financial charges.
Misrepresentation concerning the nature of an eligible
institution's financial charges includes, but is not limited to, false,
erroneous, or misleading statements concerning--
(a) Offers of scholarships to pay all or part of a course charge;
(b) Whether a particular charge is the customary charge at the
institution for a course;
(c) The cost of the program and the institution's refund policy if
the student does not complete the program;
(d) The availability or nature of any financial assistance offered
to students, including a student's responsibility to repay any loans,
regardless of whether the student is successful in completing the
program and obtaining employment; or
(e) The student's right to reject any particular type of financial
aid or other assistance, or whether the student must apply for a
particular type of financial aid, such as financing offered by the
institution.
(Authority: 20 U.S.C. 1094)
Sec. 668.74 Employability of graduates.
Misrepresentation regarding the employability of an eligible
institution's graduates includes, but is not limited to, false,
erroneous, or misleading statements concerning--
(a) The institution's relationship with any organization,
employment agency, or other agency providing authorized training
leading directly to employment;
(b) The institution's plans to maintain a placement service for
graduates or otherwise assist its graduates to obtain employment;
(c) The institution's knowledge about the current or likely future
conditions, compensation, or employment opportunities in the industry
or occupation for which the students are being prepared;
(d) Whether employment is being offered by the institution or that
a talent hunt or contest is being conducted, including, but not limited
to, through the use of phrases such as ``Men/women wanted to train for
* * *,'' ``Help Wanted,'' ``Employment,'' ``Business Opportunities'';
(e) Government job market statistics in relation to the potential
placement of its graduates; or
(f) Other requirements that are generally needed to be employed in
the fields for which the training is provided, such as requirements
related to commercial driving licenses or permits to carry firearms,
and failing to disclose factors that would prevent an applicant from
qualifying for such requirements, such as prior criminal records or
pre-existing medical conditions.
(Authority: 20 U.S.C. 1094)
Sec. 668.75 Relationship with the Department of Education.
An eligible institution, its representatives, or any ineligible
institution, organization, or person with whom the eligible institution
has an agreement may not describe the eligible institution's
participation in the title IV, HEA programs in a manner that suggests
approval or endorsement by the U.S. Department of Education of the
quality of its educational programs.
(Authority: 20 U.S.C. 1094)
24. Subpart J of part 668 is revised to read as follows:
Subpart J--Approval of Independently Administered Tests;
Specification of Passing Score; Approval of State Process
Sec.
668.141 Scope.
668.142 Special definitions.
668.143 [Reserved]
668.144 Application for test approval.
668.145 Test approval procedures.
668.146 Criteria for approving tests.
668.147 Passing scores.
668.148 Additional criteria for the approval of certain tests.
668.149 Special provisions for the approval of assessment procedures
for individuals with disabilities.
668.150 Agreement between the Secretary and a test publisher or a
State.
668.151 Administration of tests.
668.152 Administration of tests by assessment centers.
[[Page 34883]]
668.153 Administration of tests for individuals whose native
language is not English or for individuals with disabilities.
668.154 Institutional accountability.
668.155 [Reserved]
668.156 Approved State process.
Subpart J--Approval of Independently Administered Tests;
Specification of Passing Score; Approval of State Process
Sec. 668.141 Scope.
(a) This subpart sets forth the provisions under which a student
who has neither a high school diploma nor its recognized equivalent may
become eligible to receive title IV, HEA program funds by--
(1) Achieving a passing score, specified by the Secretary, on an
independently administered test approved by the Secretary under this
subpart; or
(2) Being enrolled in an eligible institution that participates in
a State process approved by the Secretary under this subpart.
(b) Under this subpart, the Secretary sets forth--
(1) The procedures and criteria the Secretary uses to approve
tests;
(2) The basis on which the Secretary specifies a passing score on
each approved test;
(3) The procedures and conditions under which the Secretary
determines that an approved test is independently administered;
(4) The information that a test publisher or a State must submit,
as part of its test submission, to explain the methodology it will use
for the test anomaly studies as described in Sec. 668.144(c)(17) and
(d)(8), as appropriate;
(5) The requirements that a test publisher or a State, as
appropriate--
(i) Have a process to identify and follow up on test score
irregularities;
(ii) Take corrective action--up to and including decertification of
test administrators--if the test publisher or the State determines that
test score irregularities have occurred; and
(iii) Report to the Secretary the names of any test administrators
it decertifies and any other action taken as a result of test score
analyses; and
(6) The procedures and conditions under which the Secretary
determines that a State process demonstrates that students in the
process have the ability to benefit from the education and training
being offered to them.
(Authority: 20 U.S.C. 1091(d))
Sec. 668.142 Special definitions.
The following definitions apply to this subpart:
Assessment center: A facility that--
(1) Is located at an eligible institution that provides two-year or
four-year degrees or is a postsecondary vocational institution;
(2) Is responsible for gathering and evaluating information about
individual students for multiple purposes, including appropriate course
placement;
(3) Is independent of the admissions and financial aid processes at
the institution at which it is located;
(4) Is staffed by professionally trained personnel;
(5) Uses test administrators to administer tests approved by the
Secretary under this subpart; and
(6) Does not have as its primary purpose the administration of
ability to benefit tests.
Computer-based test: A test taken by a student on a computer and
scored by a computer.
General learned abilities: Cognitive operations, such as deductive
reasoning, reading comprehension, or translation from graphic to
numerical representation, that may be learned in both school and non-
school environments.
Independent test administrator: A test administrator who
administers tests at a location other than an assessment center and
who--
(1) Has no current or prior financial or ownership interest in the
institution, its affiliates, or its parent corporation, other than the
interest obtained through its agreement to administer the test, and has
no controlling interest in any other institution;
(2) Is not a current or former employee of or consultant to the
institution, its affiliates, or its parent corporation, a person in
control of another institution, or a member of the family of any of
these individuals;
(3) Is not a current or former member of the board of directors, a
current or former employee of or a consultant to a member of the board
of directors, chief executive officer, chief financial officer of the
institution, its affiliates, or its parent corporation or of any other
institution, or a member of the family of any of these individuals; and
(4) Is not a current or former student of the institution.
Individual with a disability: A person who has a physical or mental
impairment which substantially limits one or more major life
activities, has a record of such an impairment, or is regarded as
having such an impairment.
Non-native speaker of English: A person whose first language is not
English and who is not fluent in English.
Secondary school level: As applied to ``content,'' ``curricula,''
or ``basic verbal and quantitative skills,'' the basic knowledge or
skills generally learned in the 9th through 12th grades in United
States secondary schools.
Test: A standardized test, assessment or instrument that has formal
protocols on how it is to be administered in order to be valid. These
protocols include, for example, the use of parallel, equated forms;
testing conditions; time allowed for the test; and standardized
scoring. Tests are not limited to traditional paper and pencil (or
computer-administered) instruments for which forms are constructed
prior to administration to examinees. Tests may also include adaptive
instruments that use computerized algorithms for selecting and
administering items in real time; however, for such instruments, the
size of the item pool and the method of item selection must ensure
negligible overlap in items across retests.
Test administrator: An individual who is certified by the test
publisher (or the State, in the case of an approved State test or
assessment) to administer tests approved under this subpart in
accordance with the instructions provided by the test publisher or the
State, as applicable, which includes protecting the test and the test
results from improper disclosure or release, and who is not compensated
on the basis of test outcomes.
Test item: A question on a test.
Test publisher: An individual, organization, or agency that owns a
registered copyright of a test, or has been authorized by the copyright
holder to represent the copyright holder's interests regarding the
test.
(Authority: 20 U.S.C. 1091(d))
Sec. 668.143 [Reserved]
Sec. 668.144 Application for test approval.
(a) The Secretary only reviews tests under this subpart that are
submitted by the publisher of that test or by a State.
(b) A test publisher or a State that wishes to have its test
approved by the Secretary under this subpart must submit an application
to the Secretary at such time and in such manner as the Secretary may
prescribe. The application must contain all the information necessary
for the Secretary to approve the test under this subpart, including but
not limited to, the information contained in paragraph (c) or (d) of
this section, as applicable.
(c) A test publisher must include with its application--
[[Page 34884]]
(1) A summary of the precise editions, forms, levels, and (if
applicable) sub-tests for which approval is being sought;
(2) The name, address, telephone number, and e-mail address of a
contact person to whom the Secretary may address inquiries;
(3) Each edition, form, level, and sub-test of the test for which
the test publisher requests approval;
(4) The distribution of test scores for each edition, form, level,
or subtest for which approval is sought, that allows the Secretary to
prescribe the passing score for each test in accordance with Sec.
668.147;
(5) Documentation of test development, including a history of the
test's use;
(6) Norming data and other evidence used in determining the
distribution of test scores;
(7) Material that defines the content domains addressed by the
test;
(8) Documentation of periodic reviews of the content and
specifications of the test to ensure that the test reflects secondary
school level verbal and quantitative skills;
(9) If a test being submitted is a revision of the most recent
edition approved by the Secretary, an analysis of the revisions,
including the reasons for the revisions, the implications of the
revisions for the comparability of scores on the current test to scores
on the previous test, and data from validity studies of the test
undertaken subsequent to the revisions;
(10) A description of the manner in which test-taking time was
determined in relation to the content representativeness requirements
in Sec. 668.146(b)(2), and an analysis of the effects of time on
performance;
(11) A technical manual that includes--
(i) An explanation of the methodology and procedures for measuring
the reliability of the test;
(ii) Evidence that different forms of the test, including, if
applicable, short forms, are comparable in reliability;
(iii) Other evidence demonstrating that the test permits consistent
assessment of individual skill and ability;
(iv) Evidence that the test was normed using--
(A) Groups that were of sufficient size to produce defensible
standard errors of the mean and were not disproportionately composed of
any race or gender; and
(B) A contemporary sample that is representative of the population
of persons who have earned a high school diploma in the United States;
(v) Documentation of the level of difficulty of the test;
(vi) Unambiguous scales and scale values so that standard errors of
measurement can be used to determine statistically significant
differences in performance; and
(vii) Additional guidance on the interpretation of scores resulting
from any modifications of the test for individuals with disabilities;
(12) The manual provided to test administrators containing
procedures and instructions for test security and administration, and
the forwarding of tests to the test publisher;
(13) An analysis of the item-content of each edition, form, level,
and (if applicable) subtest to demonstrate compliance with the required
secondary school level criterion specified in Sec. 668.146(b);
(14) A description of retesting procedures and the analysis upon
which the criteria for retesting are based;
(15) Other evidence establishing the test's compliance with the
criteria for approval of tests as provided in Sec. 668.146;
(16) A description of its test administrator certification process
that provides--
(i) How the test publisher will determine that the test
administrator has the necessary training, knowledge, skill, and
integrity to test students in accordance with the test publisher's
requirements; and
(ii) How the test publisher will determine that the test
administrator has the ability and facilities to keep its test secure
against disclosure or release;
(17) A description of the test anomaly analysis the test publisher
will conduct and submit to the Secretary that includes--
(i) An explanation of how the test publisher will identify
potential test irregularities and make a determination that test
irregularities have occurred;
(ii) An explanation of the process and procedures for corrective
action (up to and including decertification of a certified test
administrator) when the test publisher determines that test
irregularities have occurred; and
(iii) Information on when and how the test publisher will notify a
test administrator, the Secretary, and the institutions for which the
test administrator had previously provided testing services for that
test publisher, that the test administrator has been decertified; and
(18)(i) An explanation of any accessible technologies that are
available to accommodate individuals with disabilities, and
(ii) A description of the process for a test administrator to
identify and report to the test publisher when accommodations for
individuals with disabilities were provided, for scoring and norming
purposes.
(d) A State must include with its application--
(1) The information necessary for the Secretary to determine that
the test the State uses measures a student's skills and abilities for
the purpose of determining whether the student has the skills and
abilities the State expects of a high school graduate in that State;
(2) The passing scores on that test;
(3) Any guidance on the interpretation of scores resulting from any
modifications of the test for individuals with disabilities;
(4) A statement regarding how the test will be kept secure;
(5) A description of retesting procedures and the analysis upon
which the criteria for retesting are based;
(6) Other evidence establishing the test's compliance with the
criteria for approval of tests as provided in Sec. 668.146;
(7) A description of its test administrator certification process
that provides--
(i) How the State will determine that the test administrator has
the necessary training, knowledge, skill, and integrity to test
students in accordance with the State's requirements; and
(ii) How the State will determine that the test administrator has
the ability and facilities to keep its test secure against disclosure
or release;
(8) A description of the test anomaly analysis that the State will
conduct and submit to the Secretary that includes--
(i) An explanation of how the State will identify potential test
irregularities and make a determination that test irregularities have
occurred;
(ii) An explanation of the process and procedures for corrective
action (up to and including decertification of a test administrator)
when the State determines that test irregularities have occurred; and
(iii) Information on when and how the State will notify a test
administrator, the Secretary, and the institutions for which the test
administrator had previously provided testing services for that State,
that the test administrator has been decertified;
(9)(i) An explanation of any accessible technologies that are
available to accommodate individuals with disabilities; and
(ii) A description of the process for a test administrator to
identify and report to the test publisher when accommodations for
individuals with disabilities were provided, for scoring and norming
purposes; and
(10) The name, address, telephone number, and e-mail address of a
contact
[[Page 34885]]
person to whom the Secretary may address inquiries.
(Approved by the Office of Management and Budget under control
number 1845-0049)
(Authority: 20 U.S.C. 1091(d))
Sec. 668.145 Test approval procedures.
(a)(1) When the Secretary receives a complete application from a
test publisher or a State, the Secretary selects one or more experts in
the field of educational testing and assessment, who possess
appropriate advanced degrees and experience in test development or
psychometric research, to determine whether the test meets the
requirements for test approval contained in Sec. Sec. 668.146,
668.147, 668.148, or 668.149, as appropriate, and to advise the
Secretary of their determinations.
(2) If the test involves a language other than English, the
Secretary selects at least one individual who is fluent in the language
in which the test is written to collaborate with the testing expert or
experts described in paragraph (a)(1) of this section and to advise the
Secretary on whether the test meets the additional criteria,
provisions, and conditions for test approval contained in Sec. Sec.
668.148 and 668.149.
(3) For test batteries that contain multiple subtests measuring
content domains other than verbal and quantitative domains, the
Secretary reviews only those subtests covering the verbal and
quantitative domains.
(b)(1) If the Secretary determines that a test satisfies the
criteria and requirements for test approval, the Secretary notifies the
test publisher or the State, as applicable, of the Secretary's
decision, and publishes the name of the test and the passing scores in
the Federal Register.
(2) If the Secretary determines that a test does not satisfy the
criteria and requirements for test approval, the Secretary notifies the
test publisher or the State, as applicable, of the Secretary's
decision, and the reasons why the test did not meet those criteria and
requirements.
(3) If the Secretary determines that a test does not satisfy the
criteria and requirements for test approval, the test publisher or the
State that submitted the test for approval may request that the
Secretary reevaluate the Secretary's decision. Such a request must be
accompanied by--
(i) Documentation and information that address the reasons for the
non-approval of the test; and
(ii) An analysis of why the information and documentation submitted
meet the criteria and requirements for test approval notwithstanding
the Secretary's earlier decision to the contrary.
(c)(1) The Secretary approves a test for a period not to exceed
five years from the date the notice of approval of the test is
published in the Federal Register.
(2) The Secretary extends the approval period of a test to include
the period of review if the test publisher or the State, as applicable,
re-submits the test for review and approval under Sec. 668.144 at
least six months before the date on which the test approval is
scheduled to expire.
(d)(1) The Secretary's approval of a test may be revoked if the
Secretary determines that the test publisher or the State violated any
terms of the agreement described in Sec. 668.150, that the information
the test publisher or the State submitted as a basis for approval of
the test was inaccurate, or that the test publisher or the State
substantially changed the test and did not resubmit the test, as
revised, for approval.
(2) If the Secretary revokes approval of a previously approved
test, the Secretary publishes a notice of that revocation in the
Federal Register. The revocation becomes effective--
(i) One hundred and twenty days from the date the notice of
revocation is published in the Federal Register; or
(ii) An earlier date specified by the Secretary in a notice
published in the Federal Register.
(Approved by the Office of Management and Budget under control
number 1845-0049)
(Authority: 20 U.S.C. 1091(d))
Sec. 668.146 Criteria for approving tests.
(a) Except as provided in Sec. 668.148, the Secretary approves a
test under this subpart if--
(1) The test meets the criteria set forth in paragraph (b) of this
section;
(2) The test publisher or the State satisfies the requirements set
forth in paragraph (c) of this section; and
(3) The Secretary makes a determination that the information the
test publisher or State submitted in accordance with Sec.
668.144(c)(17) or (d)(8), as applicable, provides adequate assurance
that the test publisher or State will conduct rigorous test anomaly
analyses and take appropriate action if test administrators do not
comply with testing procedures.
(b) To be approved under this subpart, a test must--
(1) Assess secondary school level basic verbal and quantitative
skills and general learned abilities;
(2) Sample the major content domains of secondary school level
verbal and quantitative skills with sufficient numbers of questions
to--
(i) Adequately represent each domain; and
(ii) Permit meaningful analyses of item-level performance by
students who are representative of the contemporary population beyond
the age of compulsory school attendance and have earned a high school
diploma;
(3) Require appropriate test-taking time to permit adequate
sampling of the major content domains described in paragraph (b)(2) of
this section;
(4) Have all forms (including short forms) comparable in
reliability;
(5) Have, in the case of a test that is revised, new scales, scale
values, and scores that are demonstrably comparable to the old scales,
scale values, and scores;
(6) Meet all primary and applicable conditional and secondary
standards for test construction provided in the 1999 edition of the
Standards for Educational and Psychological Testing, prepared by a
joint committee of the American Educational Research Association, the
American Psychological Association, and the National Council on
Measurement in Education incorporated by reference in this section.
Incorporation by reference of this document has been approved by the
Director of the Office of the Federal Register pursuant to the
Director's authority under 5 U.S.C. 552(a) and 1 CFR part 51. The
incorporated document is on file at the Department of Education,
Federal Student Aid, room 113E2, 830 First Street, NE., Washington, DC
20002 and at the National Archives and Records Administration (NARA).
For information on the availability of this material at NARA, call 1-
866-272-6272, or go to:http://www.archives.gov/Federal_register/
code_of_Federal_regulations/ibr_locations.html. The document also
may be obtained from the American Educational Research Association at:
http://www.aera.net; and
(7) Have the test publisher's or the State's guidelines for
retesting, including time between test-taking, be based on empirical
analyses that are part of the studies of test reliability.
(c) In order for a test to be approved under this subpart, a test
publisher or a State must--
(1) Include in the test booklet or package--
(i) Clear, specific, and complete instructions for test
administration, including information for test takers on the purpose,
timing, and scoring of the test; and
(ii) Sample questions representative of the content and average
difficulty of the test;
[[Page 34886]]
(2) Have two or more secure, equated, alternate forms of the test;
(3) Except as provided in Sec. Sec. 668.148 and 668.149, provide
tables of distributions of test scores which clearly indicate the mean
score and standard deviation for high school graduates who have taken
the test within three years prior to the date that the test is
submitted to the Secretary for approval under Sec. 668.144;
(4) Norm the test with--
(i) Groups that are of sufficient size to produce defensible
standard errors of the mean and are not disproportionately composed of
any race or gender; and
(ii) A contemporary sample that is representative of the population
of persons who have earned a high school diploma in the United States;
and
(5) If test batteries include sub-tests assessing different verbal
and/or quantitative skills, a distribution of test scores as described
in paragraph (c)(3) of this section that allows the Secretary to
prescribe either--
(i) A passing score for each sub-test; or
(ii) One composite passing score for verbal skills and one
composite passing score for quantitative skills.
(Approved by the Office of Management and Budget under control
number 1845-0049)
(Authority: 20 U.S.C. 1091(d))
Sec. 668.147 Passing scores.
Except as provided in Sec. Sec. 668.144(d), 668.148, and 668.149,
to demonstrate that a test taker has the ability to benefit from the
education and training offered by the institution, the Secretary
specifies that the passing score on each approved test is one standard
deviation below the mean score of a sample of individuals who have
taken the test within the three years before the test is submitted to
the Secretary for approval. The sample must be representative of the
population of high school graduates in the United States.
(Authority: 20 U.S.C. 1091(d))
Sec. 668.148 Additional criteria for the approval of certain tests.
(a) In addition to satisfying the criteria in Sec. 668.146, to be
approved by the Secretary, a test must meet the following criteria, if
applicable:
(1) In the case of a test developed for a non-native speaker of
English who is enrolled in a program that is taught in his or her
native language, the test must be--
(i) Linguistically accurate and culturally sensitive to the
population for which the test is designed, regardless of the language
in which the test is written;
(ii) Supported by documentation detailing the development of
normative data;
(iii) If translated from an English version, supported by
documentation of procedures to determine its reliability and validity
with reference to the population for which the translated test was
designed;
(iv) Developed in accordance with guidelines provided in the 1999
edition of the ``Testing Individuals of Diverse Linguistic
Backgrounds'' section of the Standards for Educational and
Psychological Testing prepared by a joint committee of the American
Educational Research Association, the American Psychological
Association, and the National Council on Measurement in Education
incorporated by reference in this section. Incorporation by reference
of this document has been approved by the Director of the Office of the
Federal Register pursuant to the Director's authority under 5 U.S.C.
552(a) and 1 CFR part 51. The incorporated document is on file at the
Department of Education, Federal Student Aid, room 113E2, 830 First
Street, NE., Washington, DC 20002 and at the National Archives and
Records Administration (NARA). For information on the availability of
this material at NARA, call 1-866-272-6272, or go to:http://
www.archives.gov/Federal_register/code_of_Federal_regulations/ibr_
locations.html. The document also may be obtained from the American
Educational Research Association at:http://www.aera.net; and
(v)(A) If the test is in Spanish, accompanied by a distribution of
test scores that clearly indicates the mean score and standard
deviation for Spanish-speaking students with high school diplomas who
have taken the test within five years before the date on which the test
is submitted to the Secretary for approval.
(B) If the test is in a language other than Spanish, accompanied by
a recommendation for a provisional passing score based upon performance
of a sample of test takers representative of non-English speaking
individuals who speak a language other than Spanish and who have a high
school diploma. The sample upon which the recommended provisional
passing score is based must be large enough to produce stable norms.
(2) In the case of a test that is modified for use for individuals
with disabilities, the test publisher or State must--
(i) Follow guidelines provided in the ``Testing Individuals With
Disabilities'' section of the Standards for Educational and
Psychological Testing; and
(ii) Provide documentation of the appropriateness and feasibility
of the modifications relevant to test performance.
(3) In the case of a computer-based test, the test publisher or
State, as applicable, must--
(i) Provide documentation to the Secretary that the test complies
with the basic principles of test construction and standards of
reliability and validity as promulgated in the Standards for
Educational and Psychological Testing;
(ii) Provide test administrators with instructions for
familiarizing test takers with computer hardware prior to test-taking;
and
(iii) Provide two or more parallel, equated forms of the test, or,
if parallel forms are generated from an item pool, provide
documentation of the methods of item selection for alternate forms.
(b) If a test is designed solely to measure the English language
competence of non-native speakers of English--
(1) The test must meet the criteria set forth in Sec.
668.146(b)(6), (c)(1), (c)(2), and (c)(4); and
(2) The test publisher must recommend a passing score based on the
mean score of test takers beyond the age of compulsory school
attendance who completed U.S. high school equivalency programs, formal
training programs, or bilingual vocational programs.
(Approved by the Office of Management and Budget under control
number 1845-0049)
(Authority: 20 U.S.C. 1091(d))
Sec. 668.149 Special provisions for the approval of assessment
procedures for individuals with disabilities.
If no test is reasonably available for individuals with
disabilities so that no test can be approved under Sec. Sec. 668.146
or 668.148 for these individuals, the following procedures apply:
(a) The Secretary considers a modified test or testing procedure,
or instrument that has been scientifically developed specifically for
the purpose of evaluating the ability to benefit from postsecondary
training or education of individuals with disabilities to be an
approved test for purposes of this subpart provided that the testing
procedure or instrument measures both basic verbal and quantitative
skills at the secondary school level.
(b) The Secretary considers the passing scores for these testing
procedures or instruments to be those recommended by the test publisher
or State, as applicable.
(c) The test publisher or State, as applicable, must--
[[Page 34887]]
(1) Maintain appropriate documentation, including a description of
the procedures or instruments, their content domains, technical
properties, and scoring procedures; and
(2) Require the test administrator to--
(i) Use the procedures or instruments in accordance with
instructions provided by the test publisher or State, as applicable;
and
(ii) Use the passing scores recommended by the test publisher or
State, as applicable.
(Approved by the Office of Management and Budget under control
number 1845-0049)
(Authority: 20 U.S.C. 1091(d))
Sec. 668.150 Agreement between the Secretary and a test publisher or
a State.
(a) If the Secretary approves a test under this subpart, the test
publisher or the State that submitted the test must enter into an
agreement with the Secretary that contains the provisions set forth in
paragraph (b) of this section before an institution may use the test to
determine a student's eligibility for title IV, HEA program funds.
(b) The agreement between a test publisher or a State, as
applicable, and the Secretary provides that the test publisher or the
State, as applicable, must--
(1) Allow only test administrators that it certifies to give its
test;
(2) Require each test administrator it certifies to--
(i) Provide the test publisher or the State, as applicable, with a
certification statement that indicates he or she is not currently
decertified; and
(ii) Notify the test publisher or the State, as applicable,
immediately if any other test publisher or State decertifies the test
administrator;
(3) Only certify test administrators who--
(i) Have the necessary training, knowledge, and skill to test
students in accordance with the test publisher's or the State's testing
requirements;
(ii) Have the ability and facilities to keep its test secure
against disclosure or release; and
(iii) Have not been decertified within the last three years by any
test publisher or State;
(4) Decertify a test administrator for a period of three years if
the test publisher or the State finds that the test administrator--
(i) Has failed to give its test in accordance with the test
publisher's or the State's instructions;
(ii) Has not kept the test secure;
(iii) Has compromised the integrity of the testing process; or
(iv) Has given the test in violation of the provisions contained in
Sec. 668.151;
(5) Reevaluate the qualifications of a test administrator who has
been decertified by another test publisher or State and determine
whether to continue the test administrator's certification or to
decertify the test administrator;
(6) Immediately notify the test administrator, the Secretary, and
the institutions where the test administrator previously administered
approved tests when the test publisher or the State decertifies a test
administrator;
(7)(i) Review the test results of the tests administered by a
decertified test administrator and determine which tests may have been
improperly administered;
(ii) Immediately notify the affected institutions and students or
prospective students; and
(iii) Provide a report to the Secretary on the results of the
review and the notifications provided to institutions and students or
prospective students;
(8) Report to the Secretary if the test publisher or the State
certifies a previously decertified test administrator after the three-
year period specified in paragraph (b)(4) of this section;
(9) Score a test answer sheet that it receives from a test
administrator;
(10) If a computer-based test is used, provide the test
administrator with software that will--
(i) Immediately generate a score report for each test taker;
(ii) Allow the test administrator to send to the test publisher or
the State, as applicable, a record of the test taker's performance on
each test item and the test taker's test scores using a data transfer
method that is encrypted and secure; and
(iii) Prohibit any changes in test taker responses or test scores;
(11) Promptly send to the student and the institution the student
indicated he or she is attending or scheduled to attend a notice
stating the student's score for the test and whether or not the student
passed the test;
(12) Keep each test answer sheet or electronic record forwarded for
scoring and all other documents forwarded by the test administrator
with regard to the test for a period of three years from the date the
analysis of the tests results, described in paragraph (b)(13) of this
section, was sent to the Secretary;
(13) Analyze the test scores of students who take the test to
determine whether the test scores and data produce any irregular
pattern that raises an inference that the tests were not being properly
administered, and provide the Secretary with a copy of this analysis
within 18 months after the test was approved and every 18 months
thereafter during the period of test approval;
(14) Upon request, give the Secretary, a State agency, an
accrediting agency, and law enforcement agencies access to test records
or other documents related to an audit, investigation, or program
review of an institution, the test publisher, or a test administrator;
(15) Immediately report to the Secretary if the test publisher or
the State finds any credible information indicating that a test has
been compromised;
(16) Immediately report to the Office of Inspector General of the
Department of Education for investigation if the test publisher or the
State finds any credible information indicating that a test
administrator or institution may have engaged in fraud or other
criminal misconduct; and
(17) Require a test administrator who provides a test to an
individual with a disability who requires an accommodation in the
test's administration to report to the test publisher or the State
within the time period specified in Sec. 668.151(b)(2) or Sec.
668.152(b)(2), as applicable, the nature of the disability and the
accommodations that were provided.
(c)(1) The Secretary may terminate an agreement with a test
publisher or a State, as applicable, if the test publisher or the State
fails to carry out the terms of the agreement described in paragraph
(b) of this section.
(2) Before terminating the agreement, the Secretary gives the test
publisher or the State, as applicable, the opportunity to show that it
has not failed to carry out the terms of its agreement.
(3) If the Secretary terminates an agreement with a test publisher
or a State under this section, the Secretary publishes a notice in the
Federal Register specifying when institutions may no longer use the
test publisher's or the State's test(s) for purposes of determining a
student's eligibility for title IV, HEA program funds.
(Approved by the Office of Management and Budget under control
number 1845-0049)
(Authority: 20 U.S.C. 1091(d))
Sec. 668.151 Administration of tests.
(a)(1) To establish a student's eligibility for title IV, HEA
program funds under this subpart, an institution must select a test
administrator to give an approved test.
(2) An institution may use the results of an approved test it
received from an approved test publisher or assessment center to
determine a student's eligibility to receive title IV, HEA program
funds if the test was
[[Page 34888]]
independently administered and properly administered in accordance with
this subpart.
(b) The Secretary considers that a test is independently
administered if the test is--
(1) Given at an assessment center by a test administrator who is an
employee of the center; or
(2) Given by an independent test administrator who maintains the
test at a secure location and submits the test for scoring by the test
publisher or the State or, for a computer-based test, a record of the
test scores, within two business days of administering the test.
(c) The Secretary considers that a test is not independently
administered if an institution--
(1) Compromises test security or testing procedures;
(2) Pays a test administrator a bonus, commission, or any other
incentive based upon the test scores or pass rates of its students who
take the test; or
(3) Otherwise interferes with the test administrator's independence
or test administration.
(d) The Secretary considers that a test is properly administered if
the test administrator--
(1) Is certified by the test publisher or the State, as applicable,
to give the test publisher's or the State's test;
(2) Administers the test in accordance with instructions provided
by the test publisher or the State, as applicable, and in a manner that
ensures the integrity and security of the test;
(3) Makes the test available only to a test-taker, and then only
during a regularly scheduled test;
(4) Secures the test against disclosure or release; and
(5) Submits the completed test or, for a computer-based test, a
record of test scores, to the test publisher or the State, as
applicable, within the time period specified in Sec. 668.152(b) or
paragraph (b)(2) of this section, as appropriate, and in accordance
with the test publisher's or the State's instructions.
(e) An independent test administrator may not score a test.
(f) An individual who fails to pass a test approved under this
subpart may not retake the same form of the test for the period
prescribed by the test publisher or the State responsible for the test.
(g) An institution must maintain a record for each individual who
took a test under this subpart. The record must include--
(1) The test taken by the individual;
(2) The date of the test;
(3) The individual's scores as reported by the test publisher, an
assessment center, or the State;
(4) The name and address of the test administrator who administered
the test and any identifier assigned to the test administrator by the
test publisher or the State; and
(5) If the individual who took the test is an individual with a
disability and was unable to be evaluated by the use of an approved ATB
test or the individual requested or required testing accommodations,
documentation of the individual's disability and of the testing
arrangements provided in accordance with Sec. 668.153(b).
(Approved by the Office of Management and Budget under control
number 1845-0049)
(Authority: 20 U.S.C. 1091(d))
Sec. 668.152 Administration of tests by assessment centers.
(a) If a test is given by an assessment center, the assessment
center must properly administer the test as described in Sec.
668.151(d), and Sec. 668.153, if applicable.
(b)(1) Unless an agreement between a test publisher or a State, as
applicable, and an assessment center indicates otherwise, an assessment
center scores the tests it gives and promptly notifies the institution
and the student of the student's score on the test and whether the
student passed the test.
(2) If the assessment center scores the test, it must provide
weekly to the test publisher or the State, as applicable--
(i) All copies of the completed test, including the name and
address of the test administrator who administered the test and any
identifier assigned to the test administrator by the test publisher or
the State, as applicable; or
(ii) A report listing all test-takers' scores and institutions to
which the scores were sent and the name and address of the test
administrator who administered the test and any identifier assigned to
the test administrator by the test publisher or the State, as
applicable.
(Approved by the Office of Management and Budget under control
number 1845-0049)
(Authority: 20 U.S.C. 1091(d))
Sec. 668.153 Administration of tests for individuals whose native
language is not English or for individuals with disabilities.
(a) Individuals whose native language is not English. For an
individual whose native language is not English and who is not fluent
in English, the institution must use the following tests, as
applicable:
(1) If the individual is enrolled or plans to enroll in a program
conducted entirely in his or her native language, the individual must
take a test approved under Sec. Sec. 668.146 and 668.148(a)(1).
(2) If the individual is enrolled or plans to enroll in a program
that is taught in English with an ESL component, the individual must
take an English language proficiency assessment approved under Sec.
668.148(b) and, before beginning the portion of the program taught in
English, a test approved under Sec. 668.146.
(3) If the individual is enrolled or plans to enroll in a program
that is taught in English without an ESL component, or the individual
does not enroll in any ESL component offered, the individual must take
a test in English approved under Sec. 668.146.
(4) If the individual enrolls in an ESL program, the individual
must take an ESL test approved under Sec. 668.148(b).
(b) Individuals with disabilities. (1) For an individual with a
disability who has neither a high school diploma nor its equivalent and
who is applying for title IV, HEA program funds and seeks to show his
or her ability to benefit through the testing procedures in this
subpart, an institution must use a test described in Sec.
668.148(a)(3) or Sec. 668.149(a).
(2) The test must reflect the individual's skills and general
learned abilities.
(3) The test administrator must ensure that there is documentation
to support the determination that the individual is an individual with
a disability and requires accommodations--such as extra time or a quiet
room--for taking an approved test, or is unable to be evaluated by the
use of an approved ATB test.
(4) Documentation of an individual's disability may be satisfied
by--
(i) A written determination, including a diagnosis and recommended
testing accommodations, by a licensed psychologist or medical
physician; or
(ii) A record of the disability from a local or State educational
agency, or other government agency, such as the Social Security
Administration or a vocational rehabilitation agency, that identifies
the individual's disability. This record may, but is not required to,
include a diagnosis and recommended testing accommodations.
(Approved by the Office of Management and Budget under control
number 1845-0049)
(Authority: 20 U.S.C. 1091(d))
Sec. 668.154 Institutional accountability.
An institution is liable for the title IV, HEA program funds
disbursed to a student whose eligibility is determined under this
subpart only if--
(a) The institution used a test that was not administered
independently, in accordance with Sec. 668.151(b);
(b) The institution or an employee of the institution compromised
the testing process in any way; or
[[Page 34889]]
(c) The institution is unable to document that the student received
a passing score on an approved test.
(Authority: 20 U.S.C. 1091(d))
Sec. 668.155 [Reserved]
Sec. 668.156 Approved State process.
(a)(1) A State that wishes the Secretary to consider its State
process as an alternative to achieving a passing score on an approved,
independently administered test for the purpose of determining a
student's eligibility for title IV, HEA program funds must apply to the
Secretary for approval of that process.
(2) To be an approved State process, the State process does not
have to include all the institutions located in that State, but must
indicate which institutions are included.
(b) The Secretary approves a State's process if--
(1) The State administering the process can demonstrate that the
students it admits under that process without a high school diploma or
its equivalent, who enroll in participating institutions have a success
rate as determined under paragraph (h) of this section that is within
95 percent of the success rate of students with high school diplomas;
and
(2) The State's process satisfies the requirements contained in
paragraphs (c) and (d) of this section.
(c) A State process must require institutions participating in the
process to provide each student they admit without a high school
diploma or its recognized equivalent with the following services:
(1) Orientation regarding the institution's academic standards and
requirements, and student rights.
(2) Assessment of each student's existing capabilities through
means other than a single standardized test.
(3) Tutoring in basic verbal and quantitative skills, if
appropriate.
(4) Assistance in developing educational goals.
(5) Counseling, including counseling regarding the appropriate
class level for that student given the student's individual's
capabilities.
(6) Follow-up by teachers and counselors regarding the student's
classroom performance and satisfactory progress toward program
completion.
(d) A State process must--
(1) Monitor on an annual basis each participating institution's
compliance with the requirements and standards contained in the State's
process;
(2) Require corrective action if an institution is found to be in
noncompliance with the State process requirements; and
(3) Terminate an institution from the State process if the
institution refuses or fails to comply with the State process
requirements.
(e)(1) The Secretary responds to a State's request for approval of
its State's process within six months after the Secretary's receipt of
that request. If the Secretary does not respond by the end of six
months, the State's process is deemed to be approved.
(2) An approved State process becomes effective for purposes of
determining student eligibility for title IV, HEA program funds under
this subpart--
(i) On the date the Secretary approves the process; or
(ii) Six months after the date on which the State submits the
process to the Secretary for approval, if the Secretary neither
approves nor disapproves the process during that six month period.
(f) The Secretary approves a State process for a period not to
exceed five years.
(g)(1) The Secretary withdraws approval of a State process if the
Secretary determines that the State process violated any terms of this
section or that the information that the State submitted as a basis for
approval of the State process was inaccurate.
(2) The Secretary provides a State with the opportunity to contest
a finding that the State process violated any terms of this section or
that the information that the State submitted as a basis for approval
of the State process was inaccurate.
(h) The State must calculate the success rates as referenced in
paragraph (b) of this section by--
(1) Determining the number of students with high school diplomas
who, during the applicable award year described in paragraph (i) of
this section, enrolled in participating institutions and--
(i) Successfully completed education or training programs;
(ii) Remained enrolled in education or training programs at the end
of that award year; or
(iii) Successfully transferred to and remained enrolled in another
institution at the end of that award year;
(2) Determining the number of students with high school diplomas
who enrolled in education or training programs in participating
institutions during that award year;
(3) Determining the number of students calculated in paragraph
(h)(2) of this section who remained enrolled after subtracting the
number of students who subsequently withdrew or were expelled from
participating institutions and received a 100 percent refund of their
tuition under the institutions' refund policies;
(4) Dividing the number of students determined in paragraph (h)(1)
of this section by the number of students determined in paragraph
(h)(3) of this section;
(5) Making the calculations described in paragraphs (h)(1) through
(h)(4) of this section for students without a high school diploma or
its recognized equivalent who enrolled in participating institutions.
(i) For purposes of paragraph (h) of this section, the applicable
award year is the latest complete award year for which information is
available that immediately precedes the date on which the State
requests the Secretary to approve its State process, except that the
award year selected must be one of the latest two completed award years
preceding that application date.
(Approved by the Office of Management and Budget under control
number 1845-0049)
(Authority: 20 U.S.C. 1091(d))
25. Section 668.164 is amended by adding paragraph (i) to read as
follows:
Sec. 668.164 Disbursing funds.
* * * * *
(i) Provisions for books and supplies. (1) An institution must
provide a way for a Federal Pell Grant eligible student to obtain or
purchase, by the seventh day of a payment period, the books and
supplies required for the payment period if, 10 days before the
beginning of the payment period--
(i) The institution could disburse the title IV, HEA program funds
for which the student is eligible; and
(ii) Presuming the funds were disbursed, the student would have a
credit balance under paragraph (e) of this section.
(2) The amount the institution provides to the student to obtain or
purchase books and supplies is the lesser of the presumed credit
balance under this paragraph or the amount needed by the student, as
determined by the institution.
* * * * *
PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM
26. The authority citation for part 682 is revised to read as
follows:
Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.
Sec. 682.200 [Amended]
27. Section 682.200(a)(2) is amended by adding, in alphabetical
order, the term ``Credit hour''.
[[Page 34890]]
PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM
28. The authority citation for part 685 continues to read as
follows:
Authority: 20 U.S.C. 1070g, 1087a, et seq., unless otherwise
noted.
29. Section 685.102 is amended by:
A. In paragraph (a)(2), adding, in alphabetical order, the term
``Credit hour''.
B. In paragraph (b), adding, in alphabetical order, the definition
of Payment data to read as follows:
Sec. 685.102 Definitions.
* * * * *
(b) * * *
Payment data: An electronic record that is provided to the
Secretary by an institution showing student disbursement information.
* * * * *
30. Section 685.301 is amended by revising paragraph (e)(1) to read
as follows:
Sec. 685.301 Origination of a loan by a Direct Loan Program school.
* * * * *
(e) * * *
(1) The Secretary accepts a student's Payment Data that is
submitted in accordance with procedures established through publication
in the Federal Register, and that contains information the Secretary
considers to be accurate in light of other available information
including that previously provided by the student and the institution.
* * * * *
PART 686--TEACHER EDUCATION ASSISTANCE FOR COLLEGE AND HIGHER
EDUCATION (TEACH) GRANT PROGRAM
31. The authority citation for part 686 continues to read as
follows:
Authority: 20 U.S.C. 1070g, et seq., unless otherwise noted.
32. Section 686.2 is amended by:
A. In paragraph (a), adding, in alphabetical order, the term
``Credit hour''.
B. In paragraph (d), revising the definition of Payment Data to
read as follows:
Sec. 686.2 Definitions.
* * * * *
(d) * * *
Payment Data: An electronic record that is provided to the
Secretary by an institution showing student disbursement information.
* * * * *
33. Section 686.37 is amended by revising paragraph (b) to read as
follows:
Sec. 686.37 Institutional reporting requirements.
* * * * *
(b) The Secretary accepts a student's Payment Data that is
submitted in accordance with procedures established through publication
in the Federal Register, and that contains information the Secretary
considers to be accurate in light of other available information
including that previously provided by the student and the institution.
* * * * *
PART 690--FEDERAL PELL GRANT PROGRAM
34. The authority citation for part 690 continues to read as
follows:
Authority: 20 U.S.C. 1070a, 1070g, unless otherwise noted.
Sec. 690.2 [Amended]
35. Section 690.2(a) is amended by adding, in alphabetical order,
the term ``Credit hour''.
PART 691--ACADEMIC COMPETITIVENESS GRANT (ACG) AND NATIONAL SCIENCE
AND MATHEMATICS ACCESS TO RETAIN TALENT GRANT (NATIONAL SMART
GRANT) PROGRAMS
36. The authority citation for part 691 continues to read as
follows:
Authority: 20 U.S.C. 1070a-1, unless otherwise noted.
Sec. 691.2 [Amended]
37. Section 691.2(a) is amended by adding, in alphabetical order,
the term ``Credit hour''.
[FR Doc. 2010-14107 Filed 6-17-10; 8:45 am]
BILLING CODE 4000-01-P